The interest rates of loans
Some months ago the ECB (European Central Bank) has announced the rise in interest rates, after long and heated discussions. This does not happen for years, and the backlash on the morale of the many holders of mortgage was substantial.
The ECB increased the cost of borrowing by 0.25% to 2.25%, this in itself would not be so shocking if it’s insertion in a bullish trend that had its highest expression in the U.S., where the cost of money from June 2004 to date, grew 1% to 4%.
The ratio of cost of credit and installment loan is clear to everyone that has applied for a mortgage and have to deal with an amortization schedule for repayment of sums paid.
And certainly many in Italy are to be in this condition, although the number of mortgages continues to grow at a rate of 205 per year.
But more than the ECB rise affects the lives of Italians, when you consider that at least 2 / 3 of the calculator access in recent years include the application of a variable rate.
But how does the mechanism of interest rates and because the cost of money affect the monthly payment of our mortgage?
Simply because the interest rate in euro area countries has reference, then the default value as the EURIBOR, which varies depending on its establishment by the ECB.
Therefore, those who have recently switched mortgage will pay an installment at the highest, even considering the fact that banks adopt a method of repayment of principal by providing the first installment payment of almost exclusive interest expense and a small portion of the capital.
In any case, you need a lot of quiet respect to these complex issues, in order to evaluate serenely also increases the ECB. Indeed, on closer examination, the adjustable-rate mortgages are still considerably cheaper than fixed rates.
But we must monitor the trend, should it continue to be bullish, may recommend a renegotiation of the conditions of the loan.