The Italian mortgage market began mirroring the end of , with variable rates gaining ground in affordability while fixed rates continued their upward trend. This movement comes following the European Central Bank’s (ECB) decision to hold key interest rates steady at its first meeting of the year, maintaining the deposit rate at 2%, the main refinancing rate at 2.15%, and the marginal lending rate at 2.40%.
According to Nicoletta Papucci, spokesperson for MutuiOnline.it, the gap between fixed and variable rates has widened further in early , with the average TAN (Nominal Annual Rate) for variable mortgages now nearly 80 basis points more favorable. Despite this, a significant 90.5% of consumers continue to prefer fixed-rate mortgages, although demand for variable rates is increasing, reaching its highest level since , accounting for 6% of all mortgages.
Mortgage Rate Trends
Data from MutuiOnline.it’s Observatory indicates that the average TAN for 20- and 30-year variable mortgages remains stable. However, fixed rates have increased by another 10 basis points compared to the previous month. Variable-rate mortgages, indexed to the Euribor, are currently the most affordable option, with an average interest rate of 2.65% – falling to 2.21% for the best offers available. Fixed-rate mortgages, in , stand at an average TAN of 3.43% (including both standard and green mortgages), a 60 basis point increase year-over-year from 2.83% in .
Impact on Monthly Payments
The cost comparison highlights the difference between the two choices. For a 20-year mortgage of €180,000, the fixed-rate monthly payment is currently €54 higher than it was a year ago, representing a total increase of over €13,000 over the loan’s lifetime. Conversely, a variable-rate mortgage offers a monthly payment approximately €60 lower than a fixed rate, resulting in a total savings of nearly €17,000 over the loan term.
“The immediate savings offered by variable rates is attracting a growing number of consumers, which is understandable considering that analyzing the Euribor forward curves suggests that variable rates could remain more advantageous than fixed rates for over three years,” Papucci noted. She added that borrowers who choose variable rates will have the option to refinance to a fixed rate through a free process called surroga, allowing them to transfer their loan to another bank with different conditions.
Loan Duration and Amounts at Record Highs
Demand for mortgages continues to trend towards longer repayment periods. In , the average mortgage duration reached 24 years and ten months, the highest level since . The average loan amount also hit a record high, rising to €151,400.
This increase in mortgage activity coincides with rising property values. The average price of homes in Italy has reached €234,200, nearing its historical peak in . Among major cities, Milan remains the most expensive, with an average price of €3,470 per square meter, followed by Rome at €2,287 per square meter.
Fabio Femiani, Head of idealista/mutui, explains that banks are making small upward adjustments to lending terms, but monthly repayments remain manageable. Demand for mortgages remains strong, and lenders continue to offer new credit. He also notes that the stable environment makes long-term property investment planning easier for foreign buyers, as borrowing costs are less likely to experience sudden spikes.
According to Italian Mortgage Service, current rates as of include: a 25-year fixed rate of 3.36% and a variable rate of 3.35% for first-time homebuyers. For borrowers up to 36 years old, fixed rates for 10, 15, 20, and 25 years are 3.19%, 3.19%, 3.19%, and 3.31% respectively. Green homes are eligible for a 0.50% discount on fixed interest rates, with no bank charges for purchase, restoration, or construction.
The Italian economy is showing resilience, with easing inflation, gradually increasing household purchasing power, and a stable banking system. GDP growth is expected around 1% in , providing a solid foundation for property buyers. The ECB expects overall inflation to stabilize around 2% in the medium term, with projections for indicating 1.9% overall and 2.2% core inflation (excluding energy and food).
