Interest rates are rising in Europe, and with them also the expenses that Italian families with a variable-rate mortgage have to face. In fact, since July last year, one million families have seen their loan repayment instalments rise considerably, with increases of around EUR 200. Compared to last year, instalments are rising by almost 15% for 20-year mortgages and more than 30% in the case of 30-year mortgages.
According to ISTAT data, out of a total of around 25 million households in Italy – made up of an average of 2.3 people – around 3.5 million families have taken out mortgages. Of these, just over one million (1,029,028), i.e. 29.8% of the total, pay their home in variable-rate instalments, the Bank of Italy data show. In absolute numbers this means that of the 425.5 billion euro disbursed by banks for mortgages on real estate, 303.8 billion are fixed-rate and 121.8 billion are variable-rate.
Let us try to explain the impact on an average Italian family with a simulation. Buying a house in the suburbs of Milan costs, on average, 200,000 euro. Taking out a 20-year variable-rate mortgage in July 2022, the Rossi family would have borrowed at a rate of 0.5 per cent. If the instalment, net of interest, had been EUR 10,000 per year, this would have resulted in an annual expense of EUR 10,200 and a monthly expense of EUR 850. Under the same conditions, in the coming months of 2023, the Reds would face – due to the 14.7 per cent increase in rates – interest of about 1,700. This means having to spend about EUR 11,700 per year and EUR 975 per month.
The discrepancy is even sharper if one takes into account a variable-rate mortgage spread over 30 years, with an annual instalment of around EUR 6,660. If last summer the Rossi family was able to spend about 580 euro on the monthly instalment of the three-room apartment, today it will have to pay about 763 euro and more at the end of the month, i.e. a third more than before. In fact, the annual amount in interest has risen from just EUR 300 to EUR 2,550 for the same house.