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Mortgages: What's Happening to Interest Rates?

Mortgages: What's Happening to Interest Rates? - The health emergency caused by corona virus has shocked every aspect of society and the stock exchanges have also suffered. The declaration of the pandemic has caused markets to collapse and after an initial phase of great depression we are witnessing a slow recovery. Thanks to the measures taken by the national governments and the initiatives for families and businesses, it is hoped that a restart on better terms is better for all.

Mortgages What's Happening to Interest Rates

The corona virus has caught everyone unprepared: the epidemic coming from China has brought whole nations to their knees and governments and citizens have faced a truly exceptional situation. The bags were affected and, as always happens in times of difficulty, the thud arrived on time.

In Italy, the government treated this emergency in the same way as natural disasters and suspended many tributes. Some banks anticipated the legislature's moves by intervening with the interruption of mortgage payments and ongoing loans for up to 6 months.

Those who in recent months were preparing to take on a mortgage loan to start buying their first home or start a new business have certainly slowed down their programmes waiting to know what the market will be and the investment rate proposals.

Just as the previous crisis was giving citizens and businesses breath, the pandemic is breaking down like a tile. What are the forecasts for the near future? What will happen in mortgages and investments?

How to Assess the Interest Rate?


In the first phase of the pandemic, between 19 February and 23 March 2020, Corona virus knocked out the bags. European stock markets are estimated to have lost about 40% of their profits and Wall Street has fallen 34% for the first time in its history.

Investors' eyes were all on phase 2 and the initiatives the government would put in place to respond to the crisis and restart economic activities forced, from lock-down, to suspension. Thus the stock exchanges have recovered ground, reaching 20% in Europe and the United States.

But what is the meaning of this digression? Understanding the market trend is essential to understand the fate of your mortgage or to get an idea of what it entails to subscribe to one. By studying market rates you can see if it's time to renegotiate with the same bank or surrogate or move your mortgage to another institution that offers more advantageous terms.

What is the link between mortgage and stock market performance? Between these two entities, which are quite mysterious for ordinary citizens, there is an inverse relationship. As the economy prepares to experience a period of crisis that is often anticipated by the trend of the stock market, mortgage rates become more advantageous. In money, we could say that it is better to invest when the economy is falling apart.

There are several components on mortgage rates: the spread and two inter bank rates. The fate of a loan depends on the following rates:
  • ECB interest: remained stable at around 0% (marginal lending is 0.25% and deposits is steady at 0.50%) This makes mortgage proposals very attractive in a trend that is expected to remain in place through 2020;
  • Euribor: Hit an all-time low last March, nearing 0.50%. It is a parameter for variable rate mortgages;
  • Eurirs: its downturn began in 2013, increased in 2019 and hit an all-time low in March, marking -0.11%. This trend now stands at -0.14% creates favorable conditions for subscribing to fixed-rate financing.

Does Corona Virus Lower Rates?


According to the estimates of the scholars, difficult to verify on a broad horizon, currently the most advantageous solution is the variable rate solution. Again, preliminary assessments need to be made. How much can a family support the fickleness and variability of markets? Italian households, in these months of lockdown, have well understood how the government's decisions and the fallout of the markets have impacted with credit capacity. An average family has tested its ability to manage and maintain the usual standard of living and to cope with the crisis due to the reduction in work and the volume of business.

Experts estimate that household investment will be kept to a minimum in the next six months, despite low investment rates. The good news is that credit access conditions will be more advantageous than in the pre-crisis period. These conditions will make it easier for those who wish to sign up to the financing for the purchase of their first home and those who, aware of the economic situation, want to benefit by re-modulating their financing.

Corona Virus Occasion!


At this time the real estate market is going through a phase of strident contradiction. Just when everything stopped, the most favourable conditions for obtaining a mortgage with an advantageous interest rate were created, the asset freeze risked blurring the best opportunities. Despite warnings that citizens are discouraged from going to the bank during quarantine and job insecurity, there was an increase in private requests for funding in April.

If taking on a loan of at least thirty years remains a considerable burden for the average Italian, it was during this emergency to own a house that was perceived as a form of security and a guarantee. Italians return to look at the goods that are the source of security and stability and the offers of the banking sector. After the storm, the Italians' requests for surrogates for better conditions have increased.

Fixed-rate loans were provided in the first half of 2020, anticipating a trend: 94.3% of mortgage applications were signed in this way. The forecast for the future seems to confirm this trend.

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