The mortgage yield curve has been on an upward trend for five months. Have we entered a new era after years of low interest rates? What could be the consequences? Here are some answers.
Fares are rising again
All-term mortgage rates combined averaged 1.27% in April (excluding fees and insurance), according to Observatory Credit Housing/CSA. In December last year, they were at the level of 1.06%. However, we remain at a level close to the level of the last five years. Since the end of 2016, average rates have fluctuated between 1.35 and 1.05. Far from the 5% recorded at the end of 2008. But the current growth should not stop there.
By the end of the year, rates could range from 1.75% to 1.80%.” calculated by Michel Mouillard, an economist specializing in residential construction.
Interest rate hike linked to inflation
Prices rose 4.8% in April year on year. To slow the outbreak, the European Central Bank (ECB) intends to raise “key rates” this summer.
These are the rates at which he lends to banks, analyzes Philippe Crevel, director of the Cercle de l’épargne.
Today they are at zero. By increasing them, the ECB holds back credit, thereby slowing down economic activity, which means less demand for raw materials, hence lower prices. But this will have real estate implications.
To finance themselves with the ECB, banks will pay more Philippe Crevel continues.
Therefore, they will demand a higher interest rate from borrowers.
Rates will catch up with inflation
In theory, interest rates should equal inflation to avoid erosion of loan capital.
In fact, the increase in rates will be very gradual, says Michel Mouillard.
Otherwise, there is a risk of a complete stop of growth. In addition, the ECB predicts a decline in inflation in 2023. It will be about 2%. At the same time, interest rates are expected to remain well below inflation this year.
something that hasn’t been seen since the 1960s.
The number of loans is increasing
Given that rates are below inflation and the prospect of their growth, albeit slowly, during the year, it is better to take a loan now than later.
But banks don’t just talk about rates,nuance moderator of the Crédit Logement/CSA observatory.
They must also comply with the new rules of the Bercy High Council for Financial Stability. From now on, repayment of loans should not exceed 35% of income.
However, a third of borrowers maintained an effort rate above this rate. To get into the nails, the banks are demanding ever higher personal contributions. Therefore, some households can no longer carry out their project: low-income households, families with children, young people looking for home ownership, etc. Added to this is inflation, which eats away purchasing power. So much so that the number of issued loans for the year decreased by 14.5% in April.
Borrowers are getting better
If the number of loans issued falls, the volume of loans continues to grow. According to the Banque de France, 25.1 billion euros of new loans were issued in April compared to 24.8 billion euros in March. In other words, there are fewer buyers, but they buy more and more.
The proportion of wealthier households is increasing.” says Michel Mouillard. So the market is booming.
The appetite for the stone has not ended, written by notaries.
This is evidenced by the lack of goods for sale. Old real estate transactions (1.2 million in twelve months) have stabilized at a high level. And prices are rising: +4% for apartments and +10% for houses older than a year.