Explosive demand at auction: 400k, impact of rising mortgage interest rates

About 3.5 million Italian households with a €430 billion home equity mortgage still prefer a variable interest rate. 36% chose a variable rate, despite the possibility of switching to a fixed rate. But while a few years ago a variable rate was more favorable than a fixed rate, today it is becoming a real time bomb. With interest rates set by the European Central Bank rising, the variable rate has reached 5%, surpassing the 4% fixed rate. And the outlook for the future is not particularly rosy.

For families, this means a significant increase in payments, which for many are becoming increasingly difficult to pay. The alarm has been sounded by Nomisma' companies'and Save your home, which on Wednesday unveiled the second edition of the Salvalatuacasa review. Rate hike.

The reason for the rise in interest rates.

The reason is that rates are rising, inflation is accelerating and wages are flat. Nomisma estimates that 79% of Italians have an annual total income of less than 30 thousand euros and 31% of taxpayers do not earn even 10 thousand euros in annual income. Many Italians have an insufficient budget to manage ordinary expenses and unexpected situations - explains Roberto Anedda, Senior Advisor at Nomisma. The increase in loan rates, which have reached 10-year levels in one year, is squeezing families' disposable income. According to the survey, the payment on a variable rate loan is reaching alarming''levels for all of the above income categories to at least €1,900 net income per month, which is more than 60% of the net income of these families. For many families, restoring previous affordable income is proving difficult. The effects are alarming.

Real estate at auction

Real estate at auction: 57% is residential. On the one hand, in the first 9 months of 2023, applications for mortgages to buy real estate are down 40% and residential sales are down 16% to less than 700,000 units. On the other hand, the number of non-residential properties at auction is increasing: Nomisma estimates the number of families with properties offered at auction at 400 thousand.

Financial education

In view of this situation, Alessandra Staderini from the Financial Education Service of the Bank of Italy speaks about the need for financial education for people: many people still do not understand the difference, for example, between fixed and''variable interest rate. According to a study by the Bank of Italy, she explains, 4 out of 10 indebted families do not know that mortgage interest is linked to debt to the bank. That's why financial education is fundamental in preparing people to take out a loan. Capitali's bill, which is pending in Parliament, introduces financial education as a subject in schools.