But why this choice? The decision is based on inflationary pressures linked to the international scenario and the increase in energy prices. In August, euro area inflation reached 3.3%, the highest level in the last three years. The new monetary conditions are also reflected in the real estate financing market. The average rate of variable rate mortgages reached 3.05%, while the gap compared to the fixed rate was reduced to around 41 basis points, from over 66 points in the past. The fixed rate has in fact risen above 3.4%, also due to the effect of the yields of German Bunds, which help to guide the IRS indices.
For further information: Mortgages, the ECB raises rates again: what happens to the installments now
In this scenario, mortgage subrogation may once again become an option to be taken into consideration for those who have taken out the loan in the past and today find themselves with less favorable conditions than those available on the market. Subrogation allows you to transfer the mortgage from one bank to another, keeping the residual debt and the mortgage guarantee unchanged. The operation does not involve investigation, appraisal or penalty costs: the costs are in fact borne by the incoming bank. The operation can interest both those who took out a loan years ago at a rate that is not very competitive today, and those who have chosen the variable rate and want to reduce exposure to possible future fluctuations in rates.
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One of the reasons why subrogation is back under observation is also the possibility of using the transfer to switch, when conditions allow, from a variable mortgage to a fixed rate one. With the fixed rate, the installment remains unchanged for the entire residual duration of the loan. Any new increases in official rates would therefore not affect the monthly amount to be repaid. Those who maintain a variable mortgage, however, continue to be exposed to the performance of the reference index and the consequences of any new changes in the cost of money. The concrete convenience of a switch to a fixed bank must however be assessed by considering the capital still to be repaid, the residual duration and the conditions proposed by the new bank.
A simulation created by Credipass exclusively for Il Sole 24 Ore shows the effect of the increase in the cost of money in concrete terms. The comparison concerns a mortgage of 130 thousand euros, with a duration of 25 years and French amortization, assuming a stipulation in February or October. The model uses a composition of 85% fixed rate and 15% variable rate, considered representative of the distribution of new disbursements. With the conditions hypothesized for February, the total disbursement reaches 187,765 euros, while for the October mortgage it rises to 196,865 euros: a difference of 9,100 euros over the 300 installments.
To isolate the effect of the increase, Credipass also considers a scenario in which February conditions remain unchanged for all 25 years. In this case the total cost would have been approximately 183,376 euros. Compared to the 196,865 euros estimated for October, an increase of 13,489 euros emerges, equal to approximately 540 euros per year.
The fixed rate component represents the largest part of the simulation. The best average rate goes from 2.982% in February to 3.49% estimated for October. The monthly installment thus rises from approximately 615 to 650 euros, while the overall reimbursement goes from 184,577 to 195,034 euros. The increase is 10,457 euros, equal to approximately 418 euros per year. These numbers show why, in an upward phase, the choice of the fixed rate does not only concern the amount of the initial installment, but also the possibility of knowing in advance the cost of the loan for the entire residual duration.
For the variable rate mortgage, the simulation considers a spread of 0.60% added to the average of the one and three-month Euribor. The rate goes from 2.58% in February to 3.24% assumed for October, with an installment growing from 589 to 632 euros. However, the 25-year horizon makes the effect of expectations on rates more significant. Credipass, using the Euribor futures curve available as of 14 September, estimates a rate of 3.93% in 2029 and 4.25% in 2036. The installment would thus first reach around 679 euros and subsequently to 695 euros. Based on these hypotheses, the variable mortgage stipulated in February would entail a total outlay of 205,825 euros, compared to the 207,239 euros of the one in October. The difference is 1,414 euros. If, however, rates had remained unchanged at February levels for the entire duration, the extra cost compared to that scenario would reach 30,673 euros, approximately 1,227 euros per year.
Before deciding whether to proceed with a subrogation it is therefore important to compare the different conditions available. The nominal rate alone is not sufficient to evaluate the actual cost of the operation: the APR must also be considered, which includes the main charges connected to the financing. For those who have a variable rate mortgage or a loan taken out when the conditions were less favourable, the comparison between the offers can serve to verify whether today there are alternatives capable of reducing the overall cost or making the installment more predictable through the transition to the fixed rate.
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