In line with February, mortgage interest rates continued their upward movement in March, unrelated to the war in Ukraine.
In the view of mortgage brokers, the current context is not currently taken into account when granting loans and borrowing rates.
In order not to overburden an already complex situation associated with inflation, the upward trend in prices can slow down a little. But an increase in rates is likely if France becomes too involved in the conflict.
An upward movement in prices since the beginning of the year
Since the beginning of the year, increases in credit rates have been widespread. A phenomenon unrelated to Russia’s invasion of Ukraine. Maille Bernier, spokesperson for mortgage broker MeilleurTaux explains, “Banks announced to us at the beginning of January a gradual increase in their credit rates, averaging 0.10% each month. They had reached 1.30% in May and June, up from 1% In December, however, this scenario was before the conflict in Ukraine.”
Same note with broker Vousfinancer that noticed significant increases: “After a month in February that was already marked by higher interest rates, these increases were confirmed in March, with banks raising rates by 0.20 points on average and up to 0.50 points for a regional bank. This is unprecedented, says Sandrine Allonier, director of studies at Vousfinancer.Some of them increased by 0.80% over two months, in February and March.”
The declines we saw last year have ended.
Reasons for this upward movement: High government borrowing rates (10-year OATs), which serve as a benchmark for personal loan rates. Thus government borrowing rates rose from 0% at the end of December 2021 to 0.75% in February 2022 – a level not seen since the end of 2019 – before declining to 0.45% at the beginning of March 2022. Is their increase – even linked to inflation (3.6% in February). over one year, according to INSEE).
No direct effect yet.
At the moment, the current geopolitical context does not appear to be discouraging mortgage borrowing. No bank has yet mentioned the war in Ukraine. We don’t see any direct impact on French finance, confirms Sandrine Allonier of Vousfinancer. Banks will not shut down the credit tap, they still have high credit production targets. It is not the crisis of 2008, which was the loss of confidence in the global financial system. »
But the possible effects…
The Russian attack in Ukraine caused instability in the financial markets, with the volatility and collapse of the stock exchange (last Friday, Paris recorded a loss of 3.35% and Frankfurt of 3.76%…).
“The conflict is weakening banking stocks, which are down more than the average CAC 40. So there is still an impact on banks’ finances, says Sandrine Allonier. Will they raise their credit rates to compensate for the decline in the stock market? That, I don’t know. The sure thing. : The collapse of stock indices related to the war in Ukraine highlights the safe haven side of real estate.This means a bigger and positive attraction factor for the stone that will keep the market dynamic.
For Mile Bernier, “Banks will monitor the international situation. The envisaged rate hike may slow slightly so as not to overburden the market. But in this current unprecedented context, forecasting the future is very complex.”
However, a negative impact could occur if France became too involved in this war or if there were doubts about Europe’s ability to overcome the conflict.
“When there are major economic or political shocks, there may be an increase in government borrowing rates because the risks to investors then appear higher, notes Sandrine Alonier. In this case, this could lead to an increase in mortgage rates. This is what happened when they were There is a crisis in Greece.”
What if inflation continues to rise?
If inflation is too excessive, the European Central Bank (ECB) raises its rates, aiming to keep the inflation rate at around 2%.
But if the war in Ukraine had the effect of reducing the purchasing power of the French, due to the already noticeable rise in the prices of raw materials (oil, gas, etc.), then it is likely that the European Central Bank will continue its policy of supporting the economy by not raising its rates. Which would be good news for real estate loans.
The real estate market is still dynamic
Despite increases in mortgage rates, according to brokers, you can still borrow over 20 years at an average rate of 1.20% according to MeilleurTaux, 1.30% according to Empruntis or even 1.35% according to Youfinance.
“Demand for mortgages is strong at the start of the year, just like last year at the same time,” said Maille Bernier, a MeilleurTaux spokesperson. 2020 and 2021 were record years in terms of real estate transactions, while we were confined. In times of crisis, the stone remains a safe haven. »
So much so that real estate prices rose sharply in France (+7.1% in 4e quarter 2021 over one year according to notaries), especially in medium-sized towns, as many buyers have deserted large cities.
“We shouldn’t expect a drop in prices,” Maël Bernier points out. The demand is still there and there is very strong pressure on certain types of properties, such as homes with gardens. »