Mortgages, especially for Eurirs (Euro Interest Rate Swap), the reference for fixed-rate contracts are falling in Italy. How much could you save today by taking out a mortgage? Let's have a look at some calculations made by Facile.it.
The coronavirus emergency, combined with other market uncertainties, such as the current oil situation, is shifting investments towards safe haven assets such as gold or the German Bund. This situation, which further lowers bond yields (and therefore interest rates) is reflected on mortgage rates and in particular is reverberating on the 20-year-old Eurirs, which has been falling continuously for some time now, giving rises to the APR of up to 0.77%.
Coronavirus and mortgage savings
This means that those who have to take out a fixed-rate mortgage in March 2020 may find themselves saving as much as 9,000 euros in interest compared to those who took out the mortgage in January and more than 20,000 euros compared to those who took out the mortgage last year. This makes new mortgage contracts more attractive. Details in the simulations of Facile.it were calculated before 9th March 2020 when the Eurirs reached -0.08% against a value of +0.32% at the beginning of February.
The simulation concerns a fixed-rate mortgage, 126,000 euros with 70% LTV (loan-to-value), to be repaid in 25 years:
- Simulation 1: Fixed-rate mortgage in March 2020 vs. rates in January 2020
Best APR March 2020: 0.77% (1.24% in January 2020)
Monthly instalment: 455 euros (compared to 485 euros in January 2020)
Monthly savings: 30 euros
Total interest saved: 9,000 euros
- Simulation 2: Fixed-rate mortgage in March 2020 vs. January 2019
Best APR March 2020: 0.77% (1.95% in January 2019)
Monthly instalment: 455 euros (compared to 529 euros in January 2019)
Monthly savings: 74 euros
Total interest saved: 22,200 euros
How can you take advantage?
As time passes from these calculations to the moment of taking out a mortgage, the Eurirs value may vary. If possible, therefore, it is a good idea to ask the bank to "freeze" the level of Eurirs the day the application is submitted and not to consider, as often happens, the active level on the day the applicant's income situation is approved or even the active level on the day of the actual stipulation.
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