The rising interest rates in Italy are causing Italian families to rethink their home spending projects. The interest rates on mortgages have tripled in the past two years, reaching 4.40% at the end of December, compared to 1.45% in January 2022. This significant increase has led to a decrease in mortgage loans by 2.3 billion euros in 2023, after a 35 billion increase in the previous two years. The delicate balance between interest rates and inflation has impacted Italian borrowing capacity and led to a decline in real estate investments.
The decline in the real estate market could potentially be reversed if the European Central Bank decides to cut interest rates and adopt a more expansive credit policy in the future. However, concerns remain about how quickly Italian families will respond to these rate cuts and the slow effect they will have on borrowing costs. The consistent efforts of the ECB to raise the cost of borrowing as a means to control inflation have had negative effects on the Italian real estate market and borrowing trends.
The increase in mortgage loans in Italy has been steady in recent years, with a total growth of 35.4 billion euros in the biennium 2021-2022, representing a 9.05% increase. Despite the initial rate hikes starting in July 2022, the market has adjusted to these changes. Interest rates on mortgage loans have increased steadily, reaching 4.40% in December and 3.99% in January of the current year. It remains to be seen whether this recent decrease in rates is a structural change or just a temporary trend.
The total amount of mortgages in Italy increased significantly from 392.3 billion in January 2021 to 426.9 billion by the end of 2022. However, there has been a decline in mortgage loans in 2023, with a monthly average decrease of 192 million euros totaling 2.3 billion euros over the year. The increase in mortgage loans has been driven by favorable interest rates, both as a result of monetary policy and customer interest. The recent increase in interest rates has significantly impacted borrowing trends.
Overall, the Italian real estate market has experienced a decline in property transactions, with a drop of nearly 12% in purchases. The proportion of Italians taking on debt to buy a home has decreased from 50% to 41%. The future of the real estate market in Italy may be influenced by the decisions of the European Central Bank in the coming months regarding interest rates and credit policies. It is essential for Italian families to assess their borrowing capacity in light of changing interest rates and their potential impact on the real estate market.
