2.33% is the average borrowing rate recorded in April 2015. It is the lowest rate that France has known since the creation of this “effective rate” which allows us to have a vision overall market created in January 2003. After two years of decline, interest rates seem to have started to rise slightly. Since mid-May, around thirty banks have raised their mortgage rates and the trend could continue for the end of the year.
A drop finished for a rate still as attractive!
Is the end of historically low borrowing rates over? Yes, unequivocally, for two reasons: the increase in the rate of the French 10-year government loan from 0.37% in mid-April to 1.15% today, then the influx of demand for renegotiations or credit buy-back which clog the banks and increase the time taken to process files
As a result, in June, loan rates increased from 0.05 to 0.40 point depending on the institution. These rate hikes were done suddenly. In a fortnight, almost all the banks raised their scales. Result? The average rate over 15 years (excluding insurance) is 2.20% – against 2.05% at the end of May – and 2.5% over 20 years – against 2.35% at the end of May.
However, this recent increase is nothing to worry about. Experts believe, in view of the economic situation and quantitative easing in the euro zone and in Japan, that a “limited” increase may only go to + 1.5% maximum + 2%. And this within a period of between 6 months and 1 year.
So certainly, we are seeing an increase in rates but they are still very attractive. It is a slow rise which is not likely to climb with an OAT rising yes but below its level of 2012 where it was around 3.5%. With this slight increase predicted by our specialists, rates would return to their mid-2014 levels which we considered – at that date – to be extremely low…
The end of renegotiations? Banks say yes!
Individuals jumped at the opportunity and took full advantage of the drop in rates to renegotiate their loans. In May, one loan in two was a renegotiated loan, down from 27% last December. All renegotiations represented almost 7 billion dollars out of a total amount of 15.5 billion dollars. This is the record amount since December 2010.
Faced with the influx of renegotiation files or simply loan offers in full boom since the quarter of 2015, the banks are clogged with many files and can no longer keep up. There is a traffic jam! Rising rates would therefore allow them to curb demand and therefore discourage renegotiations.
There are signs of recovery in the real estate market, real estate professionals are recording a rebound in sales in the first half of 2015, both in old and new . The fall in property prices and the historically low level of interest rates give rise to the desire to finally become a French owner and / or investor. Buyers are back and banks know it. Faced with this return from buyers, credit renegotiations are no longer an objective for banks. Bankers then give priority to this influx of individuals wishing to finally become owners and thus meet the deadlines for processing files. Some banks go further by refusing to renegotiate or buy back a mortgage.
With a strong demand for home loans and multiple requests for renegotiation or loan repurchase, the banks were overloaded. The slightly increasing OAT allowed them to review their scales and at the same time revise their trade policies. The explanation for this rate hike is there. However, this recovery will remain slow and borrowing rates will continue to be cheap. Since 2013, we have seen a drop in rates which have brought with them a 10% drop in property prices – both new and old. This slight rise in rates should only increase slightly during the next year to reach their 2014 levels considered very attractive at the time … We can conclude that this slight rise is painless and does not penalize individuals wishing to buy housing.