Better results are expected as mortgage rates are favourable for customers, even if most banks have seen their rates rise.

Taking into account that 2010 probably saw the lowest rates of all-time, they skyrocketed last November with an average of 0.40 points since October, to finally reach the same levels in March as at the start of 2010.

Why?

1-      First of all, we can explain the rise in financial market rates. On the 21^st of March, the 10 year OAT Tec (i.e. the State mortgage’s long-term rate used by banks as a reference to determine fixed rates) reached 3.56% compared with 2.50% last summer!

2-      Other explanations for the increase in mortgage rates are the State’s budget difficulties further to the fears of an inflationist turmoil (2.40% of inflation in the Euro zone last February) and the possible rise in the refinancing rate of the European Central Bank.

However, households’ borrowing capacity is not limited as yet. As  most experts will tell you, “the increase in rates has not had much effect on monthly payments and borrowing capacity”. Over 20 years, for a €165,000 loan, this represents a €35 over cost. Besides, rates remain low with regard to the last five years (5.15% over 20 years in October 2008). This is the reason why borrowers who’ve taken out a loan between 2007 and the beginning of 2009 should still renegotiate on their loan.

3-      Even if the financial impact is minimal, the Loi Lagarde – which gives the chance to call upon insurance delegation – enables numerous borrowers to reduce their monthly repayments with up to 50% of savings on the insurance cost. The insurance loan represents 5 to 16% of the overall loan cost with rates going from 0.10% to more than 0.40% depending on profiles. Therefore it could be a way to lower the total cost of a loan whilst benefiting from excellent warranties.

All else being equal, the climb of rates is more than offset by these measures for most households.

To preserve their buying power, borrowers will be able to increase the duration of their loan which was brought down to 17 years last December. Currently around 19 years, the average duration of loans has thus fallen considerably. As a comparison, they were at roughly 22 years in 2008.