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Mortgages: variable with the double risk

75% of the funding is with this formula

In Italy spreading the adjustable rate mortgage, which is more risky fixed and is the basis of many of the current difficulties of the families: the investigation of the Bank of Italy says, noting that at the end of 2007 approximately 75% of the loans to buy the house was agreement with this formula. Bank of Italy does not go digging on why this happened, but customers frequently complain that their institutions were Credit to move towards the floating rate.

Precisely, what are risky variable rate mortgages? According to the analysis of the Bank of Italy (which was edited by Emilia Bonaccorsi di Patti and Roberto Felici, studies of the Service) variable rate loans granted in 2004 have a chance to come in suffering more than twice that of contracts fixed rate. The risk that the accounts do not come back is particularly high for younger borrowers, for those living in the South and non-EU immigrants. The risk differential is greatest for loans at the end of 2005, when market interest rates have reached the minimum value: since the mid- 2007, the rate of interest "median" on adjustable-rate mortgages rose from 3.7 to 5.5%, while the cost of fixed-rate rose from 5 to 5.9%.

The period 2004-2007 was a boom for the loans (all types). Italian banks have provided for a cumulative value of over € 60 billion annually, unprecedented in the past. Bank of Italy notes that "the sum of these factors could have favored access to credit by customer groups previously excluded from the market because most financially fragile, not transiently increase the risk, traditionally very low, mortgage Italian families." In other words it is happened to us the equivalent of an explosion of those mortgages in America called "subprime," that is intended for less affluent social groups, and this has increased the average risk. At the end of 2007, says the Bank of Italy, "3.5% of the loans had been a delay in the payment of one or more installments, the 1, 2% were classified as stranded, and 0.63% was past suffering. " In total, there were problems for loans up 5.3 percent.

In the four years under review also increased the average amount of loans: from 125,000 to 138,000 €. But the race started well before the mortgage in 2004: in the period between 1998 and 2007, loans to households for house purchase homes in Italy have increased on average by 17.2% per year.

Source: http://www.lastampa.it