IRS rates rose in the second quarter of 2026, yet the best fixed-rate mortgage offers held steady, with spreads slightly below zero. Lenders are absorbing the difference, and that capacity is finite.
IRS rates, which set the cost of fixed-rate funding, rose during the second quarter of 2026. Fixed-rate mortgage offers did not. According to the Bussola Mutui survey by CRIF and MutuiSupermarket, the best spreads on new fixed-rate mortgages sit slightly below zero, while variable-rate spreads remain around 0.3%.
A negative spread is not an accounting error
A spread below zero means the lender is pricing the loan under its own funding benchmark. The apparent loss on the individual contract is recovered elsewhere: deposit margin, still wide with rates paid on deposits at 0.64% according to Banca d'Italia, ancillary products, and above all customer acquisition targets, since the mortgage remains the main entry point into a long-term banking relationship.
The approach holds as long as two conditions hold: contained funding costs and high credit quality. Both currently do. The mortgage default rate stayed at 0.4% in the first quarter, a historically low level reflecting three years of strict underwriting.
Demand has shifted towards purchase
On the online channel, purchase of a first or second home now accounts for 76% of applications and 81% of originations. Refinancing has fallen to 19%. The pool of borrowers holding expensive legacy contracts has thinned out, and rising IRS rates have made it uneconomic to renegotiate loans already agreed on favourable terms.
In line with the higher cost of short-term money, preference for fixed rates has risen again, from 86% to 88% of applications. The choice looks contradictory only at first glance: fixed currently costs less than variable precisely because lenders are compressing its spread. On a benchmark loan of 140,000 euros against a 220,000 property over twenty-five years, the best fixed offer sits at 2.85% with a monthly payment of 653 euros, while the best variable falls to 2.23%.
How much the market leans on credit
The share of residential transactions supported by a mortgage rose to 47.8% in the first quarter of 2026, against 45.8% a year earlier. Residential transactions themselves grew 4.4% over the same period according to Agenzia delle Entrate. Close to one transaction in two therefore depends directly on credit conditions, a higher exposure than during the 2021 expansion.
On values, the price per square metre of mortgaged properties accelerated 5.5% year on year, driven by new build at 11.1% and renovated stock at 11.2%. The comparison with general indices is instructive. In July the idealista index showed a national average of 2,030 euros per square metre, down 1.1% on the month and up 3.1% on the year. Credit concentrates on the upper, energy-efficient part of the stock, and that is where prices actually run.
Where the balance breaks
The banking system's capacity to absorb higher IRS rates is finite. If the ECB moves in September, as part of the market expects after the June increase and the July pause, lenders face two options. Restore the spread, adding perhaps thirty to fifty basis points to the borrower's rate. Or ration volumes through access criteria, tightening loan to value and debt service ratios.
The first option hits demand across the board. The second hits it selectively, excluding marginal borrowers, particularly young first-time buyers, who are also the segment that has carried transaction growth in recent quarters.
Over the coming months the average rate will say little, held down as it is by commercial decision. The informative figure is the distance between the rate offered and the corresponding IRS. Once that distance turns positive again, the residential market will have lost the cushion that has protected it from the reversal of the monetary cycle.