To counter the inflationary pressure weighing on the markets, the European Central Bank (ECB) has started raising interest rates. In the face of this tightening of monetary policy, what are the consequences for the real estate sector?
La hausse des taux d’intérêt décidée par la BCE vise à réguler l’inflation qui s’accélère depuis le début de l’année 2022. Afin de limiter la hausse des prix, la présidente de la procéder, a Christine Lagaré to me Gradual and continuous increase in interest rates. After an initial reassessment at the beginning of July, a new increase will be made in September. A restrictive policy is not without consequences for the cost of the mortgage. In fact, mortgage rates are increasing in the wake of the upward movement of ECB rates. As evidenced by figures from the observatory Crédit Logement/CSA, which reveal an increase in average loan rates of 32 basis points, all terms combined. Since December 2021, average loan rates have increased from 1.06% to 1.38% in May 2022. An increase that should continue through the end of the year, reaching 2% on average over a 20-year period, according to the data.
With accelerating inflation and rising house prices, the purchasing power of households in France is declining. As confirmed by the Bank of France 10% increase in loan repayment incidents in April, over a year. Evidence that the financial situation of the French is deteriorating in the face of rising prices. Especially since access to real estate credit has become more complicated between rising real estate prices and tightening grant conditions. In addition, banking institutions are still restricted by usury rates. This maximum rate represents the limit beyond which banks cannot lend. Slight increase in wear rate at 1Verse Last July seemed insufficient to unlock the market, as more and more French were taken out of credit.
Another note: indicators point to a slowdown in the real estate market. Depending on the area and the quality of the property, sales times are getting longer and property price negotiations are back. Under the influence of inflation and rising interest rates, it is Real estate prices are likely to drop. Of course, this is not about rare properties whose prices remain separate, such as an apartment with an exceptional view in the Saint-Germain-des-Prés district of Paris. With inflation rising to more than 5%, credit remains favorable to borrowers despite the high fixed interest rates. In fact, candidates for a mortgage loan can get a loan at a rate much lower than the inflation rate.