Variable rate mortgages, skyrocketing installments

In January 2022, 26% of active mortgage loans in January 2022 were at variable rate. The most tangible effect ofrate hike by the ECB was on the average installment of these: the installment has in fact increased on average by +36% compared to the lows of mid-2022, with a peak of +49% for mortgages disbursed in the last 5 years. This is what emerges from an analysis conducted by CRIF on the impact of the increase in mortgage rates. The main evidence emerging from the CRIF analysis is the increase in the financial exposure of borrowers, despite the 24 installments paid in the period between January 2022 and December 2023. The analysis records that the growth trend in rates has meant an increase of + 25% on the overall level of debt of those who have taken out a variable rate mortgage in the last 5 years.

Despite the increase in interest rates, those with adjustable rate mortgages have not shown a increase in the insolvency rate. The analysis of the financial tension index, constructed by CRIF to identify cases of excessive indebtedness and prevent situations of failure, shows a worsening. In this case, subjects with variable rate mortgages show an increase in financial tension, with a shift of more than 15 percentage points from the low and medium-low level classes to the medium-high and high level classes.

“The growth dynamics of interest rates have led to a significant impact on variable rate borrowers in the last two years. The analysis conducted by CRIF provides a detailed picture of this situation, noting above all how the financial exposure of subscribers has changed of mortgages disbursed in the last 5 years” comments Simone Capecchi, Executive Director of CRIF. “However, despite these impacts, the data highlights that there has not been a significant increase in the insolvency rate although an increase in financial stress has been observed. The prospects of a possible rate cut in June 2024 raise hopes for relief for borrowers, reducing pressure and helping to stabilize the financial situation. In any case, it is essential, in the current macroeconomic and geopolitical context of uncertainty, to remain vigilant to face the challenges that the scenario could present.”

By Editor

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