After the rebound seen in January, interest rates applied to new home purchase financing transactions fell again in both February and March, thus bringing the cost of money for home loans back to thresholds in line with those of 2018. A calling card presented by the new ABI dossier, published a few days ago, and one that should continue to distinguish the Italian credit market for at least a few more quarters and, perhaps, for the whole of 2019.
Mortgage volume grows, rates fall
Going in greater order, we highlight that during the period under consideration the growth of the mortgage market has been steady, registering a positive 2.5 percent year-on-year change in total mortgages outstanding from households.
Turning to the interest rate front, it is again the ABI that informs how the average rate on new home purchase transactions was 1.87 percent, down from 1.91 percent in the previous month and 5.72 percent at the end of 2007. On the other hand, the average rate on total loans fell to 2.58 percent, down from 2.59 percent in the previous month and from 6.18 percent touched just before the crisis at the end of 2007.
With such data, therefore, the prospect of an Italian credit market that is very favorable to those who intend to take on debt for the completion of a real estate investment transaction finds confirmation. A convenience that seems to have convinced those who are applying for a mortgage to freeze the onerousness of the operation by betting on the fixed rate, and thus winning the security of being able to better predict their monetary outgoings even when the course of rates will resume to rise, in the near medium - long term future.
Improving credit quality
Another figure of particular note, which is not surprising compared to what is already known, is that of net non-performing loans. The figure--calculated net of write-downs and provisions already made by lenders from their own resources--is in fact down to 33.6 billion euros, compared with 54.5 billion euros a year ago (- 21 billion, - 38.3 percent) and compared with 77 billion euros two years ago (- 43.4 billion, - 56.3 percent).
Compared to the peak level of net non-performing loans, reached in November 2015, the reduction is more than 55 billion euros (- 62.1 percent). Finally, the ratio of net non-performing loans to total loans rises to 1.95 percent, marginally up from the previous month, but still below the 2 percentage point threshold , above all, well below the 3.16 percent a year ago, 4.41 percent two years ago and the peak of 4.89 percent in November 2015.
Funding from customers
Finally, let us conclude with a nod to the dynamics of customer deposits, which as a whole are confirmed to have grown by 1.2 percent year-on-year. The merit in this case can be attributed to the fact that deposits (current account, certificates of deposit, repos) grew by about 43 billion euros compared to a year earlier (+ 3 percent) year-on-year), while bond deposits (i.e., medium- to long-term funding) fell by 23 billion euros (- 8.6 percent year-on-year).
With rates on deposits essentially unchanged from the previous comparison period, it follows that the spread between the average interest rate on loans and the average interest rate on deposits to households and corporations is at very low levels, at 198 basis points, down 1 basis point from 199 in the previous month and, more importantly, from the more than 300 basis points that characterized late 2007, just before the onset of the financial crisis.
