It is a question that all those who have opened a mortgage loan have asked themselves. The choice of the duration of the loan, in fact, is fundamental, as it has a direct impact on the value of the installment to be paid.
However, it must be borne in mind that the increase in the duration of the loan entails a greater amount of interest to be paid and, in the case of a variable rate, greater uncertainty regarding the evolution of the installment amount over the years.
The mortgage market and interest rates
First of all, let’s see what market context we are experiencing, both in terms of real estate sales and home purchase loans
The real estate market is recovering slightly: in recent months, volumes have been increasing, even though prices are struggling to recover. So a contained recovery of the market, we are still far from the values reached in the years of the real estate boom, those before the crisis
Interest rates are particularly favorable, thanks to the policy of the ECB, with the quantitative easing still active and the rates that should not rise before 2019. And so the Euribor, the reference rate for variable-rate mortgages, is still in negative territory, with great satisfaction for those who have chosen this type of loan. But also the Euros, the analogous indicator for the fixed rate, has particularly low and interesting values, to the point that the mortgage market in recent months has been supported by the subrogations of those who have decided to move from variable to fixed.
How are the Italians’ choices regarding the duration of the loan being modified?
In this market context, what is happening to one of the most important parameters for choosing a mortgage, or its duration?
According to the analysis of some important operators in the sector, the average duration of mortgages today would be around 18 years, with a significant increase compared to a few years ago, when the same value was about one year lower, close to 17 then.
At first glance, this might seem like a negative signal about the state of Italian finances. It could, in fact, be inferred that, in order to be able to purchase a property, and given that the economic conditions are less advantageous, Italian families are forced to borrow for a longer period, in order to be able to reduce the monthly payment to be paid to pay off the loan.
In reality, if we look closely at the survey data, there is also an increase of around 8% in the average amount provided, from € 123,500 to € 133,500. So it would seem that the increase in the duration of the loans does not depend so much on a reduction in the income of Italians, but rather on the desire to ask for a larger amount, perhaps to purchase a more valuable property taking advantage of the particular conditions on mortgages, which are very favorable, as we said.
Ultimately, we can unbalance and imagine how the Italians make their choices about mutual: a house is rarely purchased, perhaps only once in a lifetime, and therefore you orient yourself for the best, compatible with your finances. If the conditions are favorable, you choose to buy a higher quality product.
Who gets into debt for longer, and those who prefer shorter loan periods?
The national average is around 18, as we have said. It is interesting, however, to see how there are quite obvious differences between the Italian regions.
And so we have the dells that arrive up to an average loan term of 21 years, followed by the Losio with 20 years and 3 months. On the other hand, Fruitloan, with 13 years and 10 months, are those who definitely prefer to work for less long periods.
Also, in this case, the differences “character” of the Italians emerge, confirming the fact that the choices, when we talk about mortgages, are very personal and not always in line with the “logic” of the market.
How much impact does the installment have on Italian living standards?
Finally, an interesting data on the impact of the installment for Italian families: although higher amounts are requested, the favorable market conditions mean that there is still an average decrease in the installment of around 10% (today it is around 600 euros) and that this is about a quarter of the salary, on average.
On this point, therefore, it seems that Italians are less exposed than before but beware of very low rates, which can, in practice, only increase.