what you need to know before buying- Corriere.it

from Gino Pagliuca

In the province of Milan the average amount of a loan is 139,800 euros, in the city the average rises to 233,600 euros. Eurirs and Euribor, simulations for those who have to buy a house

Looking for an apartment in Milan today, if you don’t have the cash available to pay for the houses now at the price of a real estate bubble, is becoming prohibitive. Not only prices but also rents have skyrocketed and the rise in mortgages (which for now concerns the fixed rate but the variable one presumably will follow in the coming weeks) makes the purchase very expensive.

The weight of mortgages in Milan

To give an idea of ​​what expensive mortgages mean for Milan, it is enough to report some numbers of the residential report of the Revenue Agency: in Italy on average in 2021 the amount of mortgages requested amounted to 135,800 euros, in the province of Milan the value rises to 139,800 euros, in the city the average was 233,600 euros. A monstrous difference that certainly increased with the surge in prices recorded in the first months of 2022. But optimistically taking the figure of 2021 as current means that from the beginning of the year to today, an installment for a 30-year fixed-rate mortgage for that figure which has risen on average from 805 to 985 euros per month. And, attention: this applies to those who have defined the contract, while those who are still in the preliminary phase do not really know what will happen yet, given that the parameter on the basis of which the cost of fixed mortgages is defined increases day by day. To give just one example, from Monday 13th to Tuesday 14th June the 30-year Eurirs increased by 15 cents. This increase alone implies an increase of 20 euros per month on the installment of our mortgage.

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Fixed rate or variable rate?

In a scenario like this for those who want to buy a house in Milan by financing themselves, the dilemma between fixed rate and variable rate really complicated to solve. The variable currently starts with much lower installments: again for our typical mortgage we can charge 784 euros, 200 euros less than the fixed one. But the next increases in the cost of money that the ECB has already announced will almost certainly drag the cost of the Euribor, the parameter that serves as a basis (month by month) for the calculation of the variable mortgage and will lead that installment to rise. If within a year the Euribor were one point higher, the variable rate would be 972 euros, with one and a half points more it would reach 1,067 euros, with two points to 1,162. To risk on the variable you need to know in advance that the cost can go up a lot and have your back covered: if the initial installment of 784 euros is the maximum sustainable, it is better to leave it alone immediately.

The third way of the banks

Banks today offer a third way. The so-called mortgage with the cap: a variable that however has a limit to the growth of the rate. If we can give unsolicited advice, it is better to steer clear of it: these products cost significantly more than traditional variables and protect very little. If you are afraid (understandable) of the increase in the cost of money, it is better to take the fixed price immediately.

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June 21, 2022 (change June 21, 2022 | 16:22)

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