Citizens with a variable rate mortgage are going to have a very bad time. The new ECB rate hike will further increase rates.
Let’s find out how much the monthly payment with a variable rate mortgage will increase due to the new rise of the European Central Bank.
2023 is being a bad year from an economic point of view. We will also get out of the pandemic emergency but the war in Ukraine continues to have repercussions on the finances of Italian families. The reality of a conflict close to our nation has serious social, psychological, political and economic consequences. To ensure that in 2023 two nations can still go to war to settle disputes is to have learned nothing from past history.
And while cities collapse and men, women and children perish, Italian families have to do the math in their pockets because inflation weighs dangerously on their shoulders. The European Central Bank continues to raise the cost of money and this means yet another beating for those who have a variable rate mortgage. In just a few months, the fees have increased by an average of 300 euros, a disproportionate and unsustainable figure for many families. And the worst is yet to come.
Variable rate mortgage beaten by the European Central Bank
The ECB announced on May 4 a further increase in the cost of money by 25 basis points. The total increase thus reaches 300 since June 2022. As a result, rates increase to 3.32%. It had been about ten years since there had been increases so drastic as to convince many people to contract a variable interest rate and not a fixed one.
Until February 24, 2022, the floating rate was very convenient. Now, however, it’s Russian Roulette ready to carry out a massacre. The ECB has been forced in recent months to raise interest rates to counteract hyperinflation. The cost of money has gotten higher and higher to allow excess liquidity to be repaid but who cares about variable rate mortgage holders? No help has come from the government or banks who take advantage of the situation to increase profits.
It becomes more and more difficult, then, to apply for a loan and obtain it. To bear a high fee you need to have an expensive salary or the institution will reject the application. And who can afford to support a monthly expense of 800 euros?
We have reached an estimated increase in the increases that translates into approximately 237 euros more than the monthly payment of a mortgage. An increase of 52% in one year. Dizzying increases that block the real estate market and, in small towns, cause the collapse of the sector. The only solution for those who have a variable rate mortgage is to request a subrogation or renegotiation in the hope that the proposal will be able to reduce the monthly charge.
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