Return to monetary normalization announced by the Governor of the Bank of France. Interest rates should be raised gradually, reaching 2% to 3%.
Gradual but continuous rise in real estate prices
The Governor of the Bank of France, Francois Villeroy de Gallo, who is also a member of the European Central Bank (ECB) Board of Governors, said on BFMTV that mortgage rates will continue to rise.
The growth rate was +0.50 percentage points since the beginning of the year, or even +0.75 points in some banks. The governor pointed to a rise in mortgage rates ‘Progressive, but persistent’. In June 2022, average prices also showed another increase. François Villeroy de Galhau refers to an estimated increase in the range Between 1 and 2% or more.
Banks so far are very favorable to granting mortgages
Since the beginning of the year, mortgage rates have risen continuously. OAT (Obligation Assimilable du Trésor), which serves as the basis for setting credit rates for banks, moved from negative territory to 1.8% in early June. Although banks lend on average 1.55% over 20 years. They could not pass all the increase in the cost of money due to the wear rate. If we look in the rearview mirror, we had 1Verse The 2019 quarter is an equivalent average rate, but at the time the wear rate was 2.83% compared to 2.4% today. Therefore, banks choose Shrink its margin to continue gaining new customers. But for how long? The European Central Bank’s announcement on Thursday May 9th that it will raise interest rates by 25 basis points in July may change the situation. First of all, because it mechanically increased OAT, which flirted by 2% during advertisements. Then, because some banks can choose to deposit their money in the ECB, which will be compensated again, rather than selling credit at a loss. Thus, the most modest profiles of borrowers can be punished again … However, we must remember that our French peculiarity, fixed rates, favor borrowers and constitute a protection against inflation “explains Cecile Roquelure, director of studies at” Borrow “.
Inflation: desirable return to normal at 2%
Given that the conditions were met, the European Central Bank announced an increase of +0.25 pips in its prices in July and expects the same increase in September.
“We are deeply committed to bringing inflation back to our 2% medium-term target.”as specified by the Governor of the Bank of France.
Back to normal financing terms
For the Governor of the Bank of France, Target borrowing rates are not exceptional, they are the old rates. “Everyone seems to have forgotten a bit, but the mortgage is usually around 2 to 3%.”As Francois Villeroy de Gallo says. In particular, he states that this has not prevented real estate from financing itself well.
Reassuring explanations: “We are coming out of exceptionally favorable conditions, which were justified by very low inflation, and we are moving towards more normal financing conditions”.
With borrowing rates on the rise, it is more necessary than ever to call in a mortgage broker. This finance expert will be able to direct the borrower to the organization that offers the best rate, under the best conditions according to the borrower’s profile and project.
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