On April 7th as expected, the European Central Bank raised its main guiding rate to 1.25%. This is the end of about 2 years of stability with a low rate of 1%―and this rise is just beginning.
In concrete terms, while mortgage rates, either fixed or variable, are already rising, they may continue to rise progressively, as the difference between fixed and variable rates is likely to continue to decrease, making French mortgages with variable rates less and less interesting for borrowers.
Why such a decision from the European Central Bank? Simply, it replies, to fight against inflation. In the euro zone, principally because of the price increase of raw materials, prices rose by 2.6% in March, after achieving 2.4% in February: levels above the 2 % limit considered acceptable by the European Central Bank.
Even if its president, Jean- Claude TRICHET, assures us that managers of the European Central Bank have not decided that this rise was the first of a series of rises ”, its director of economy declared, some days later, that inflation will “continue to guide the evolution of interest rates” of the monetary institution.
A decision that does on the other hand, speak of a firmer strategy from the European central Bank regarding the refinancing conditions of banks in the short term from now until the end of the year.
In the short term, regarding mortgages the currency policy of the European Central Bank may only directly concern variable rates. These rates effectively lean on short term rates, the Euribors, which have been rising for 6 months (these rates follow the evolution of the refinancing rate of the European Central Bank). Thus, the Euribor 3 months reached 1.33% on April 14th against 0.65% a year ago.
In France only 10% of mortgages are subscribed to variable rates compared to 90% in Spain and Portugal, countries in which borrowers may suffer more as a result of the hardening of the monetary policy of the European Central Bank.
As for mortgages with fixed rates, they follow the evolution of long term rates― particularly those of OAT (Treasury bonds) ― which have also been rising for several months, notably because of the budgetary situation in countries like Greece, Ireland, and Portugal. Thus, on April 14th the OAT 10 years reaches 3.74% against 2.49% last August, its lowest level ever.
In April, 79% of partner banks of Sextant French Mortgages raised their fixed rates for mortgages by 0.17 points on average; for the record, in March, only 87% did so.
And while 17% of them have kept their fixed rates stable, 4% of partner credit institutions have decreased their rates.
In total, since the beginning of the year, the rise of fixed and variable rates has reached 0.45 points.
|What next? Option 1 Click here to enquire and we will get back to you
Option 2 speak to an adviser now…