A consumer association estimated that this year repossessions after mortgage default should grow 19%, as a consequence of interest rate rise.
Italy is also facing a “mortgage crisis”? Well, yes and no. On one side, recent rise in interest rates surely may cause some strain to who is repaying an adjustable rate mortgage (91% of total, says this consumer association), but the problem has to be correctly evaluated.
First of all, a 19% growth may look very much, but has to be compared to the quite low numbers of mortgage default in Italy. If you start from a small number, a smaller number is needed to have a relevant percent relative increase. Other data, in fact, indicate that the percentage of possible defaults will rise from 3,0% to 3,5%.
But most important, interest rates rise from European Central Bank can’t be considered unexpected. In the last few years, interest rates were very low, and it was quite predictable a rise.
Surely, especially a couple of years ago, many people should have chosen a fixed rate mortgage instead of a adjustable rate one. On this, there is at least a contributory negligence of banks and borrowers. In fact, banks did not suggest enough fixed rates mortgage, but it’s also true that many borrowers did not ask for them. On the contrary, somebody even pointed banks that proposed FRM as some kind of cheater that tried to repeat an higher interest mortgage with no reason. Well, now you see that there was a reason: it was higher at the moment, but it was also fixed.
Original post (in Italian): Allarme mutui in Italia. Ma…
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