Christine Lagarde, governor of the ECB
The ECB announces another rate hike in March: here’s how mortgages change and what to do if the installments have increased too much
The European Central Bankdriven by Christine Lagardeannounced another hike of another 50 basis points after December and a key rate that hits 3%.
The press release reads: “The Governing Council will continue to raise interest rates significantly at a steady pace and to keep them at levels restrictive enough to ensure a timely return of inflation to its 2% target over the medium term”.
Lagarde’s first point to justify the increases is theinflation worrying and too heavy for families and businesses. The second is the resilience of the Western economy, greater than expected. The recession, explained Lagarde from the World Economic Forum in Davos a few weeks ago, will be milder than expected and the improvement in macroeconomic conditions is clear.
In light of what has been said, how mortgages will change after the ECB effect?
The first thing to know is that only the installments of variable-rate mortgages will increase. Experts calculate an increase of 35-40 euros per month for a mortgage of 130 thousand euros over 25 years, signed in January 2022. The increase reaches almost 200 euros adding up all the increases decided by the ECB since last summer.
What can be done if the installment becomes unsustainable
One street is the traditional one of the substitutebut it is expensive: the government has renewed the instrument of the renegotiation of the rate, ie the transition from variable to fixed which is more stable. Banks cannot refuse the request for those who have access to a mortgage whose Isee income does not exceed 35 thousand euros and with stipulation or acceptance before January 2023.
Fixed rate mortgages
The existing ones remain unchanged. For a few weeks thereand major banks are cutting the fixed rates of their offerseven by 55 basis points: “Ing has reduced them by 10 points, Credit Agricole by 15, Intesa Sanpaolo by 15 points for the over 36s while for the under 36s it has given a cut of 55 points” says Guido Bertolino of MutuiSupermarket.
When mortgages will cost less again
Mortgages could cost less again: this is what emerges from the Euribor, the index that guides the variables. The three-month forecast calls for further increases in ECB rates in the short term but assumes a decline in the long term starting early 2024.
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