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

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

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 buyreal 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.

Recommended real estate
Buy in Italy for 506165£

Sale flat in Florence 657 492,00 $

2 Bedrooms

2 Bathrooms

80 м²

Buy in Italy for 1559891£

Sale flat in Milan 2 026 250,00 $

5 Bedrooms

3 Bathrooms

250 м²

Buy in Italy for 1192569£

Sale flat in Naples 1 549 110,00 $

4 Bedrooms

5 Bathrooms

219 м²

Buy in Italy for 1501338£

Sale flat in Florence 1 950 191,00 $

2 Bedrooms

2 Bathrooms

140 м²

Buy in Italy for 1043614£

Sale house in Lucca 1 355 622,00 $

4 Bedrooms

1 Bathroom

600 м²

Buy in Italy for 2144769£

Sale flat in Florence 2 785 988,00 $

2 Bedrooms

2 Bathrooms

75 м²

By the end of 2023, real estate auctions will reach 160 thousand, and in''2024 is expected to increase by 10%. 57% is residential real estate. However, auctions, as the report notes, do not solve the situation, neither for the debtor nor the creditor. They are becoming increasingly lengthy, with high costs and an average loss of 45% of the value of the property. There is also a concrete risk for the debtor to lose their home. Anedda therefore talks about the imperfections of the system with very limited results for the debtor: Today, the market value of the properties offered at auction is around 130 billion, but the base price drops to 51 billion. Gianfranco Dote, CEO of Save Your Home, says that. He needs to take concrete measures to guard against the mortgage crisis and protect each''a family that finds itself in a difficult situation. He encourages policymakers and lending institutions to consider securing a community value bond when eliminating debt, which is a beneficial solution for all parties. By securing a community value bond, the debtor does not lose their home, but can transfer their mortgage to an auxiliary property company (Reoco) for servicing and rent. This ensures that debtors retain their jobs.

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.

Comment