Mortgage rates continue to rise, checking account payments are struggling to get going. According to Bank of Italy surveys, interest rates on home loans reached 4.52% in April. A year ago they were at 2.2% before the ECB implemented seven interest rate hikes to bring inflation under control. The doubling of borrowing costs for families is having an impact on the real estate market: sales fell by 8.7% in the first quarter and almost one in three real estate agencies is reporting difficulties in obtaining bank loans from potential buyers.

In view of the increasing economic uncertainty, institutes have also become more cautious in lending. According to Bank of Italy (banks and money) statistics, credit to the private sector fell by 0.5% in April compared to the same month in 2022. The result, mainly the decline in loans to companies (-1.9%), fell by a third even month. It’s not clear whether the drop is due to falling demand from companies fearful of interest rates averaging 4.52%, or caution from banks worried about a possible spike in bad loans that have been reported since December have increased by a billion .

For the time being, however, the ECB’s tightening of monetary policy proved to be beneficial for the Italian institutions, which, after a long era of zero interest rates, were again making profits on their accounts and on the stock exchange. The sudden increase in the cost of money was quickly reflected in credit conditions, but not in financing. The average remuneration banks paid to depositors was 0.64% in April, up slightly from 0.60% in March. The banks thrived on the difference between the interest demanded by debtors and the interest paid to customers, generating a 9.2 billion brokerage margin and a 5.3 billion net profit for the January-March period. How long can the golden age last?

Political and monetary authorities are insisting that banks also carry the rate hike into current accounts, which had an interest rate of 0.29% in April. ECB President Christine Lagarde recently emphasized that the central bank would like monetary policy to be fully passed on to the banks. Not only in terms of the loans they make to households and businesses, but also in terms of the deposits they receive from households and businesses. All deposits. A request that Italian institutions have so far rejected on the grounds that current accounts are a service and not an investment and therefore cannot offer a return. The situation could only change in the face of a cash flight from checking accounts to more profitable jobs. Deposits fell by 3.4% in April, which is probably not enough to reverse the trend. Will the 18.2 billion BTP valore boom inflows be the cornerstone?