After having applied some exceptional reductions on the mortgage rates in May and after a stabilisation in June, banks are now increasing the rates in July. What could explain such a rise after a 19-month period of continuous decrease?
The main reason is very simple: in July, further to the rise of the French treasury bonds, like a domino effect, many banks have put up their fixed mortgage rates by an average of 0.15%. This increase would actually be very progressive, which is why the average rates stay unchanged for the moment, at a historically low level.
From the end of June, several banks proceeded to raise their rates. But 16% of the rating scale received in July report that there is certain stability. Other banks state some increases from 0.10% to 0.30%, on all terms or only on certain ones like the lower than 20-year terms.
Nevertheless, for the moment, these rises in rates are relatively painless for borrowers and have no effects on the average rates which stay at a low floor:
- 2.50% for a 10-year term
- 2.90% for a 15-year term
- 3.25% for a 20-year term
- 3.50% for a 25-year term
Thus, the mortgage rates are still at their historical low: it is now possible to borrow at less than 3% for any duration, which has never been seen since 1947!
Reimbursing a same €1000 monthly payment on a 20-years term, you can obtain €16,000 more now as compared to January 2012. And even if some signs of a rise can be noticed, banks want to be extremely competitive and they always grant some good reductions for their favourite clients.
Rate Increase: Good or Bad News?
Nobody thinks that the increase in rates will cause a decrease in property prices. It is true that traditionally a rise of the mortgage rates automatically knocks the real estate prices down. Yet, for a couple of years, rates and property prices seem disconnected. The decrease in rates started in 2012, and is usually linked to a decrease in real estate prices, which is not the usual phenomenon.
If you are interested in purchasing a property in France, Sextant Properties would be very happy to help you find the residence of your dreams and guide you through the acquisition process.