Do you want to see a stranger roll his eyes and not believe what he is hearing? Try to tell him something about the spreads that Italian banks currently practice on mortgages. He will ask you if you are joking, if you are sure. Indeed this anomaly, which is to the benefit of customers, is entirely Italian because in other countries the situation is certainly different.
The gross margin , why is this the spread, is it possible that it is 0.25%? The profit margin that a banking institution today asks for on a fixed-rate mortgage loan has actually increased compared to last summer, when in ideal customer situations conditions were agreed with a spread almost zero .
What we at Mr Banca ask ourselves is what a banking institution gains , offering a loan on the Italian market under these conditions and until this light spread policy is sustainable.
It is not difficult to suspect that, given the current situation, in future spreads in Italy will only be able to rise . What is not easy is to understand when and how.
The spreads applied by banks in Italy have reached the minimum possible , it will be difficult if not impossible for national banking institutions to sustain this situation for a long time to come.
There are several factors to consider. The banks cannot actually increase the spreads and therefore the rates lightly, for at least two reasons that we immediately go to list.
First of all, all the abundant liquidity that the ECB has introduced in the banking channels in recent years must be used in some way, it is part of the same requirements imposed by Europe on the banking system.
Furthermore, increasing the cost of mortgages to all the mortgage lenders would mean putting a portion of customers, those who are weaker and potentially at risk, in difficulty, and this clearly does not want the banks.
Think, dear friends, that the insolvency rate on mortgages for Italian families has fallen below a formidable 2% , perhaps thanks to the “generous” policy of the banks on the costs of the mortgages themselves.
Finally, this is a factor that we like, keeping the spreads low also contributes to the increased competitiveness of the sector, perhaps fueled by websites such as ours where they compare and offer the best offers from Italian banking institutions.
Recent analyzes have shown that for the rest of this year and next the demand for mortgages with an amount exceeding 80% of the value of the property is destined to grow further than in the past. It has helped a lot the Guarantee Fund , which has brought LTV levels back to pre-crisis levels, but we wonder if this instrument will be refinanced. Without a Guarantee Fund, how will banks be able to grant mortgages of this type, with such low spreads, and with a light heart?
From one spread to another, yes, just “that”, the great Spread . The difference between the BTP and the Bund remains an unknown factor, and inevitably affects the collection operations of the banks. Last year this spread was at 120 points, now for some months it has been stable above 250. The Italian real economy, net of political risk, should instead express a Bt-Bund spread of around 150 points.
The increase in the BTP-Bund spread clearly impacts the mortgage product of our national banks and the profitability of this channel for institutions is already at a minimum , if not in some cases even negative. The profitability of banks on mortgages provided in Italy is unlikely to improve, if not with upward adjustments to the spread on offer.
Now, all this being clarified, we expect the spread applied to mortgages and mortgage loans in Italy to rise . The big banks could start, the most prominent ones, to then follow the small and medium-sized ones, the smaller ones even more than the large ones have to adapt the offer to meet the needs of profitability.
When will this happen? Probably this year. If, however, the ECB really re-launched its T-Ltro workhorse, then there would be other liquidity in circulation for the banks with the probability of a shift in the spread increases to the first half of the new year.
For those, who are lured by the excellent conditions offered by the banks, are thinking of taking out a mortgage to buy a house , there is the other good news of this period: in addition to favorable mortgage rates, real estate prices also seem extraordinarily good in this beginning of the year. From 2011 to today, the average drop in house prices in Italy has now reached almost 25%. As for the mortgage spread, perhaps even real estate prices have bottomed out?
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