Rates down, variable mortgages are more convenient

The upward cycle seems to have run its course and for those with a variable mortgage in their assets, a truce can be glimpsed: the European Central Bank has started a phase of cooling of rates and a further cut , given as probable in June 2025, promises to lighten the installments already in the short term. After months of increases, it is a change of pace that has the taste of a breath of fresh air for many. Let's see the concrete effects of this inversion on the reality of mortgages in Italy.

ECB cuts rates: what happens to variable mortgages

According to sources reported by Bloomberg, a 25 basis point cut is considered highly likely at the June meeting, thanks to the softer attitude expressed by some members of the ECB board. No official confirmation, but the market is moving as if the announcement was already written.

For its part, the Central Bank has already cut its key rates by 75 basis points since the beginning of the year , and analysts expect this path to continue. The effect is visible on interbank rates: the 3-month Euribor, which acts as a compass for variable mortgages, fell to an average of 2.32% in the first days of April, marking a drop of 12 basis points compared to March and more than half a point from the end of 2024.

It is no surprise, then, that the cost of new mortgages is also starting to follow the same trajectory: in March 2025, the average rate on home mortgages had fallen to 3.14%, a sharp decline from the 4.42% recorded in December.

How Much Will Variable Rate Mortgage Rates Drop in 2025?

In variable rate financing, the monthly payment follows the trend of the reference indexes (such as Euribor) and therefore decreases as soon as they fall. In practice, the rate cut decided in Frankfurt translates almost immediately into a lightening of the installments for those with an indexed mortgage.

For a typical borrower, a 25 basis point (0.25%) cut means about 17 euros less to pay each month . If there are further reductions in the coming months, the savings could rise to around 40 euros per month.

With the April cut, the average TAN on variable mortgages dropped from 3.69% to 3.44%, bringing the monthly payment of a 150,000 euro mortgage over 20 years from approximately 884 to 865 euros: nineteen euros less, put in your pocket without having to do anything.

Now, if another 25 basis point cut were to arrive in June, as many expect, according to rumors collected by Bloomberg, the installment could drop to 846 euros. In two moves, the overall savings would reach 38 euros per month.

Practical example: how much you save on the installment with the new rates

For many Italian families, this drop in rates translates into tangible relief. In recent years, the majority of those who took out a mortgage have chosen a fixed rate (over 80% of new contracts), protecting themselves from fluctuations . Thousands of families with variable rate mortgages have seen their rates rise rapidly during the ECB's rate hikes.

Just think that in mid-2022 the average installment for a typical €126,000 mortgage was around €456, rising to around €752 at the end of 2023. Now the trend has finally reversed: indexed installments are gradually returning below €600, giving family budgets a boost. Even €20-30 less per month may seem like little, but over the course of a year they mean a few hundred euros saved to be allocated to other important expenses.

Variable rate mortgages more convenient for Italian families

The rate cut is good news especially for those who already have a variable mortgage in progress. The benefits are immediate and automatic , since the installment is periodically recalculated based on the new value of the Euribor (usually every one or three months).

Families who struggled to cope with the increases in 2023 may now see the first signs of a reversal. In addition, the prospect of further cuts in the coming months makes the scenario even more favorable. Those with long-term mortgages could benefit from a total saving of several thousand euros, if the downward trend were to continue throughout 2025.

Mortgages 2025: Fixed or Variable? The Offers Compared

The drop in rates also changes the scenario for those who are about to apply for a mortgage. For much of 2023, fixed-rate mortgages were significantly more convenient than variable rates, but now the gap is narrowing . According to MutuiOnline, in April 2025 the best fixed rates on the market are around 2.2%, while variable rates are around 2.6%, a difference of a few tenths of a point.

On average in March the fixed rate was still around 2.82% Tan (instalment of around €818 on €150,000 in 20 years) against around 3.7% of the variable rate, but after the last cut the advantage of the fixed rate has shrunk to a few dozen euros on the standard instalment.

Already today there is no shortage of variable offers almost aligned with fixed levels, a sign that the gap is closing. Experts predict that as the cuts continue this gap will disappear. With an Euribor expected to fall further (some hypothesize below 2% by the end of the summer), the variable could return competitive or even cheaper than the fixed by the end of the year. For new borrowers it is therefore an open choice: the fixed offers the certainty of a constant installment, while the variable starts slightly higher but with concrete prospects of a future decrease if the rate trend is confirmed.