The amount of money people asking for and the amount granted on the rise, subrogation declining, and favourable rates. This is the summary of 2018 for mortgages in Italy. With the help of Facile.it, we have drawn up some forecasts for what will happen to Italian mortgages for home purchases in 2019.
What happened with mortgages in 2018?
Analysing a sample of 40 thousand mortgage applications collected between January and December 2018, Facile.it and Mutui.it have found that the amounts requested in 2018 increased. Aspiring borrowers tried to obtain, on average, 132,453 euro, which is 3.3% more than in 2017. The increase in the average amount requested was accompanied by an increase in the amounts actually given; the average loan amount granted by credit institutions during the past year was 128,886 euro (+0.5% compared to 2017).
Another positive figure is the Loan To Value (LTV) figure, i.e. the percentage of the value of the property financed by the loan. This parameter rose from 61% in 2017 to 69% in 2018 for mortgage applications, and from 60% to 65% for mortgage amounts granted. The average age of the applicants was also slightly higher (going from 40 to 41 years), while the average duration of the repayment plans requested remained stable (just over 22 years).
As far as mortgage rates in 2018 go, after a year of very low level rates, there was an end-of-year increase in bank spreads to the order of 10 basis points for variable rates and 20 basis points for fixed rates. These increases only affected the new mortgages contracted.
Are fixed-rate or variable-rate mortgages better in 2019?
The trend recorded in the last few months of 2018 was also confirmed in 2019; during the first few days of the new year, some Italian banks again make upward adjustments to the spreads on new fixed-rate long-term mortgages. These increases, however, were mitigated at least in part by the fall in the Eurirs. Even so, some credit institutions, in contrast to the trend, took advantage of the situation to adopt more expansionary commercial strategies, choosing to keep their spreads unchanged.
"To avoid paying more than necessary, though,” says Ivano Cresto, mortgage manager of Facile.it, “given the different rate strategies applied by the banks, it is very important to compare the offers of more than one credit institution; only in this way is it possible to guarantee the best rates currently available which, in fact, are still very close to the all-time lows and extremely convenient".
Is it better to choose a fixed-rate loan or a variable-rate loan? For 2018, the fixed rate in Italy was confirmed as the undisputed king of the Italian mortgage market, with as many as eight out of ten potential mortgage customers turning to this type of financing (73% in 2017), with a peak in November (87%).
"These figures clearly reflect how the well-known events linked to the increase in the BTP-Bund spread and tensions in the markets have pushed many aspiring borrowers to take refuge in the fixed rate,” explain Mutui.it. “However, at least in the short term this choice could prove to be unprofitable if you consider that, according to the data at hand, variable rates still give important savings on monthly instalments for the same amount of money.”
Mortgage subrogation in Italy 2019
Also, subrogation in 2018 had an important impact on the total demand, representing a peak of 27% of the total in May and June. However, the year was characterised by a significant decline in subrogation; in November the percentage fell to 19.5% while in December it reached the lowest point for 2018 of 16.6%, a percentage that has carried over to the new year and has also been confirmed by the preliminary data recorded in 2019.
How come? "The most evident effect of the increases in bank spreads applied to new fixed-rate mortgages is precisely the drop in the percentage weight of subrogation applications,” says Ivano Cresto. “Compared with September 2018, in fact, the economic convenience of taking on someone else’s mortgage is reduced today. It certainly continues to make sense, however, to change the type of rate from fixed to variable or vice versa if you want a different personal exposure to the risk of any increases in the Euribor.”
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