No need to rush to get a mortgage

Press review of the French business newspaper Les Echos.

With interest rates rising, do the French have the right to rush on mortgages, and banks in a scramble to distribute them? Ace! It is about this impulse like many other mass phenomena: there is, behind it, the myth on the one hand, and on the other the reality.

If people have been flocking to agencies in recent months to get such loans, it is becauseThey fear that higher interest rates are linked to monetary policy tightening by the European Central BankTo fight accelerating inflation, they don’t end up disproportionately increasing the cost of their real estate purchases. Whether they hear it on the radio or read it in the papers, that’s how they feel anyway.

Because inflation is corrected, real rates are always negative, which means that the customer gets richer when they borrow, despite the interest.

But such a vision is a fantasy, and economic reality is not this. Admittedly, interest rates are rising by leaps and bounds, and only the cost of purchasing real estate can be affected. But rates remain relatively low and should remain so. After correcting for inflation, the real rates are still negative, which means that the customer gets richer when he borrows, despite the interest.

As for real estate prices, they are far from jumping. The reason for this development is quite simple: fewer buyers are willing to start.

No doubt banks are happy to maintain opacity. Not only do they bet on home loans as the most effective weapon for gaining and retaining new customers in the long term, but they also know that these are risk-free loans for them in times of downturn. Activity, unlike loans granted to them by companies or consumer loans granted to individuals. Therefore, it is neither illegal nor dangerous for them to distribute it in abundance.

It remains to be seen whether such an explosion in mortgage credit is truly desirable for our society.. To be sure, using the savings of the French people and mobilizing their debt capacity to invest in real estate would reassure them. What could be better as a safe haven in times of uncertainty, in a particularly chaotic environment? But it is up to Depriving the economy of money that would have benefited other asset classes, creating more value and generating jobs.

This column was published in reverberationsummarized by us.

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