The loss of Triple A in France: no real negative effect on the mortgage rates.
Despite the loss of the French AAA rating in January, the 10 years OAT (government bond rate) remains constant at 3.10%. Given that banks were anticipating Standard & Poor’s downgrade, they had cautiously taken the necessary measures to absorb the impediment. Therefore, there is currently no direct repercussion for retail clients.
Sub consequently, since the announcement of the loss of the AAA rating on the 13th of January 2012; we have observed a minute increase of the 10 years OAT rate. OAT is the French government bond rate on which French banks index their mid & long term fixed rates. It had previously been dropped to 3.03% before the announcement to eventually reach 3.10% on the 16th of January after the downgrade of the French government by the credit rating agency.
After seeing interest rates increasing earlier last year to ultimately stabilise during the summer, this month, two banks have increased their rates. However the majority of our bank partners have kept their rates steady and it has even been reported that one bank has reduced its fixed and variable rates by 0.20%. We should bear in mind that, last month, most French banks have decided to keep their rates unchanged in spite of the European Central Bank’s policy announcement to lower its principal rate from 1.25% to 1%.
Because a slight raise in the interest rates is expected, analysts advise that it is a very good time to take on a French mortgage. Fixed rates in particular are recommended.
At the moment, there are very competitive rates available on the market. For instance, 3.60% for a 5 years fixed rate.
Most importantly, Moody’s and Fitch, the two other major credit rating agencies, maintained the AAA grade for France.
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