Buying a home in Italy can be exciting but also confusing, especially if you come from a country where mortgage rules and interest-rate dynamics are different. Here costs can rise even when the European Central Bank (ECB) does not increase its official interest rates. Starting from January 2026, the avarage interest on new mortgages has risen by +0.21 percentage points compared with the start of the previous year (Codacons).
Contents
Why is this happening?
This can happen because, even though the ECB controls the ‘price of money’ in Europe, other factors also affect italian mortgage rates.
Who really controls mortgage rates in Italy
Even though Italy follows the ECB’s monetary policy, the ECB does not directly set mortgage rates.
Instead, there are two key components:
1) Market indexes (IRS and Euribor)
These are European financial-market indicators. They influence the interest rate you get.
- Fixed-rate mortgages are tied to the IRS (Interest Rate Swap), a long-term indicator.
- Variable-rate mortgages are tied to the Euribor, which moves with short-term ECB decisions.
2) Bank spreads
Every bank adds its own margin (“spread”) on top of the IRS or Euribor.
This margin reflects:
- bank funding costs;
- risk of lending;
- competition (or lack of it);
- administrative costs.
Even if the market index doesn’t move, banks can raise spreads.
Why fixed-rate mortgages in Italy can increase even with stable ECB rates
Italy is a country where almost all new mortgages are fixed-rate, because families prefer stability.
But fixed rates depend on very long-term market expectations (10–30 years), not on what the ECB is doing right now. The key indicator here is the IRS.
The IRS tends to rise when financial markets expect:
- future inflation;
- higher long-term interest rates;
- more government debt;
- geopolitical instability
- slower future ECB rate cuts.
If traders think the future is uncertain or inflation will stick around, the IRS increases, and so do fixed-rate mortgages.
What this means for the future
Even in a scenario where the ECB starts lowering rates slightly, fixed-rate mortgages may continue to rise because long-term expectations remain elevated. Italian banks price mortgages more like the bond market, not the central bank.
Banks in Italy are raising mortgage costs independently
Italian banks rely heavily on:
- deposits
- issuing bonds
- refinancing older debt
All of these have become more expensive in the last 18 months.
The pressures from higher costs of savings, expiring old cheap bonds and new EU regulations increase overall costs for bank. And this trend will continue into 2026. This is one of the strongest reasons why future mortgage rates may rise regardless of ECB policy.
Fixed vs Variable in Italy: what expats should know
Fixed-rate are the most popular among Italians because are more stable, even if they are more sensitive to long-term interest-rate expectations. In fact they are likely going to rise because long-term financial indicators are climbing.
Actually variable-rate are less common now. They moves with the ECB’s short-term actions (Euribor) and even if they could decrease slightly when the ECB cuts rates, they still carry risk if inflation or energy shocks return.
Total mortgage costs can rise even when interest rates don’t
There is an hidden part of the mortgage rate increasing. In fact, the TAEG (Total Annual Effective Rate) can going up because banks rise fees, require extra insurance, and because of spread.
The new normal for mortgages in Italy
We are leaving behind the ultra-low-rate era of 2015–2021.
Italy is entering a new phase where:
- mortgage rates will stay higher for several years;
- fixed rates are more expensive relative to variable;
- long-term financial conditions matter more than the ECB;
- banks will remain cautious and keep spreads elevated.
For who is looking to buy property, this means that they don’t have to expect a sudden return to a cheap fix-rates. Maybe who can afford a potential volatility of market, they should consider a variable-rate mortgage.
