Rise in mortgage rates 3 times paralyzes real estate market - News - Ansa.it

The ECB's monetary policy squeeze has crushed the dream of many young people and families to buy a house. As mortgage interest rates have tripled over the past two years, the number of Italians unwilling to get into debt has risen, while real estate transactions have fallen. It will now become fundamental for banks and families for the ECB to "accelerate the beginning of the decline in the cost of money", says Lando Maria Sileoni, secretary general of Fabi.

Fabi conducted an analysis reflecting the impact of monetary policy on mortgages and the real estate market over the past three years.

At the end of December last year, with the cost of money rising to 4.5% on the ECB's decision, average mortgage interest rates stood at 4.40%, triple the 1.45% in January 2022, the lowest level in years. Mortgage interest rates have already risen in the first half of 2022 as the market, as usual, outpaces central bank decisions.

Additional significant increases occurred during 2023: 3.68% in January and 4.02% in March, peaking in November with interest rates at 4.61%, then declining to 4.40% in December and 3.99% in January this year. The question remains whether "the decline in the last two months is the beginning of a structural process rather than a random fact," explains Fabi.

This situation led to a reduction in the proportion of people taking out mortgages to buy real estate, from 50% to 41%.

"The easing of monetary policy, which is now expected by most observers, is fundamental to restore the banks' ability to support the real estate market. For Italy, it means bringing life back into an important part of our economy, which represents a significant percentage of GDP if we take into account all the related transactions and the whole so-called 'induced effect'," adds Sileoni.

The third quarter of 2023 confirmed the sharp decline in residential real estate transactions in Italy that began in the fourth quarter of 2022 after continuous growth accelerated since 2020.

Decreases were recorded throughout the area and in all housing types. The number of transactions at the end of September 2023 was 507,879, compared to 576,115 in the same period in 2022, representing a decrease of 11.8%. New residential transactions were particularly impressive (-15.9%). The data demonstrates that "the delicate balance between interest rates and inflation has severely tested the ability of Italians to borrow and reduced real estate investment," concludes the analysis.