Italian Residential Mortgage Market Update

In this commentary, we provide an overview of the Italian housing market as well as how the recent past is shaping the Italian residential mortgage-backed securities (RMBS) market.

Key findings include:
-- Despite the Coronavirus Disease (COVID-19) pandemic and the Russian invasion of Ukraine, the Italian economy and its housing market have remained relatively stable, demonstrating a sound degree of resilience.
-- In particular, several government measures have contributed to containing the impact of the health emergency caused by the pandemic on the labour market, and tax incentives for building renovations (focused on energy efficiency and safety of existing residential buildings), added to existing fiscal measures, were launched in recent years, helping to underpin domestic house prices.
-- Italian house prices have shown a high degree of stickiness, confirmed by a lower rate of growth in recent years than in other key European countries; consequently, the level of affordability is still supportive for Italian households, and DBRS Morningstar sees a lower risk of large house price corrections in the coming years.
-- The performance of Italian RMBS has remained stable as well in recent years, with a low level of delinquencies currently observed in DBRS Morningstar-rated deals, after a peak registered at the outbreak of the pandemic.

“In the current environment, characterised by rising mortgage rates, an uncertain geopolitical situation, and a moderate increase in unemployment expected in 2023, DBRS Morningstar envisages some deterioration in the performance of Italian mortgages in the coming quarters, which, however, is not expected to materially affect its ratings on Italian RMBS”, said Antonio Laudani, Vice President, from the European RMBS and Covered Bonds team at DBRS Morningstar.