Hopes for a recovery in the real estate markets take a hit as mortgage interest rates continue to rise in November 2023, according to the latest monthly report from the Italian Banking Association (ABI). The already critical situation appears destined to worsen in the short term.
Economic Impacts on Monetary Policy
The ABI report, updated in November 2023, reflects a concerning upward trend in interest rates. The economies of the Eurozone and Italy are negatively affected by the restrictive monetary policy initiated by the ECB, resulting in a sharp contraction of the PMI index and an annual reduction in industrial production. These effects also reverberate in the Italian banking market, with a further increase in mortgage interest rates.
Interest Rates: Record Increase in the Decade
In the last 18 months, rates have risen to unprecedented levels in the past decade. The combination of persistent inflation and actions by the European Central Bank to counter it has had a significant impact on the economy, affecting the purchasing power of Italians and the real estate market.
Relevant Data for October 2023
The recent increase in interest rates is evident in the data provided by ABI for October 2023:
The average rate for home purchases has risen to 4.37%, up from 4.21% in September.
The average rate for business financing has increased to 5.45%, up from 5.35% in September.
The overall average rate on loans is now 4.70%, an increase from 4.61% in September.
Interest Rates: Credit Market Dynamics
Simultaneously, loans granted to businesses and households have decreased by 3.6% compared to the previous year. However, ABI’s Deputy General Manager, Gianfranco Torriero, emphasizes that there is no credit squeeze, as loans remain higher than pre-COVID levels in September 2019.
Regarding the future, experts predict a possible decrease in interest rates, but the timing remains uncertain. A determining factor will be the course of the economy, ECB actions, and inflation.
Financial Markets Context
To better understand the situation, it is essential to consider the context of financial markets. In October 2023, in addition to the increase in rates on new mortgages, there was an uptick in bank current account rates, rising to 0.51% from 0.47% in September. The rate applied to new fixed-term deposits is 3.57%, higher than the Eurozone’s average. The yield on new fixed-rate bond issuances is 4.47%, a significant increase from June 2022.
Conclusion
In conclusion, despite current challenges, optimism persists while awaiting a possible decrease in interest rates in the medium term. It remains crucial to stay informed and prepared to make the most of opportunities when they arise. The economic situation and interest rates remain evolving dynamics, and constant vigilance is key to navigating through this period of financial uncertainty.
