Credit Costs Rise Despite Lower Interest Rates

The cost of borrowing is going up. Banks are charging mortgage rates to families and loan rates to businesses that are back to where they were three years ago – even though the cost of money is actually lower now, according to a report from Unimpresa.

In December 2022, mortgages averaged 3.36% and business financing was at 3.55%, while the BCE rate was 2.5%. Today, the cost of money has fallen to 2% – that’s 50 basis points less than it was then. However, bank rates are higher, or at least the same as, they were at the end of 2022: 3.73% for mortgages and 3.52% for business loans.

Unimpresa says this shows a slow and incomplete response to monetary policy. Despite the significant drop in the benchmark rate, families and companies are still paying similar, if not higher, interest rates than they were in 2022, when borrowing was much more expensive.

The data confirms that while the cost of money has returned to pre-pandemic levels, the rates applied to families and businesses haven’t changed much in three years, Unimpresa points out. This gap is hurting the economy and could slow down investments, spending, and the current recovery.

It’s crucial, Unimpresa believes, for the government to encourage banks to pass on the ECB’s monetary policy changes to customers. This isn’t about forcing banks, but about fostering a sense of shared responsibility to create better conditions for businesses and homebuyers.

According to the Unimpresa study center, which analyzed statistics from the Bank of Italy, bank rates on mortgages and business loans have largely returned to levels seen three years ago, despite the current lower cost of money.