Real estate rates are rising faster than expected. Increases reaching almost +50% from one month to another in a regional bank for some profiles, a record according to Vousfinancer.
With a real estate market that has been running at full speed for several years to reach a record high in 2021, the current context could change the situation. Although the effects of the war in Ukraine are difficult to predict for the market, some signals give warning, especially for the construction sector that begins to measure the impact of the effects of the war in Ukraine, with an increase in energy costs. and materials. These increases could have an impact on household budgets and more increases are on the way.
Regarding financing conditions, even if the ECB decided to keep its key rates, interest rates for individuals are in March. A predictable increase announced at the end of 2021 after record lows last year. However, this increase in scales is much more marked than expected.
“In March, following the government’s lending rates, several banks increased their lending rates, from 0.10 points, but up to 0.5 points for one of them… A rate increase without previous in a single month”, underlines the broker in a monthly press release. liberation
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“While it was still possible to borrow at less than 1% in 20 years – or even more than 25 years – in January 2022, now it is almost mission impossible, with very few exceptions… A bank has thus increased the rate offered to the same . profile for a loan over 20 years from 1.03% to 1.53%! However, at 1.35% on average over 20 years, we remain on interest rate levels that are still attractive despite the recent increases”, analysis Sandrine Allonier director of studies at Vousfinancer. The regional bank in question therefore increased the rate for this profile by almost 50% in a month.
What are the published rates in March?
According to Vousfinancer, the average rates are now: 1.2% in 15 years, 1.35% in 20 years and 1.55% in 25 years.
An increase that could reduce the volumes of loans granted, even if the banks intend to continue their strategy of winning new customers through mortgages.
“All banks have a high goal of credit production that should lead them to continue lending while ensuring that their margins are preserved. But rate discounts are still possible for the best profiles”, analyzes Julie Bachet, CEO of Vousfinancer .
Without the conflict in Ukraine having a real impact on these increases for the moment, such a rise in interest rates could cause concern for the good health of the market. Especially since the rate of wear could then become a brake for some profiles since the latter is fixed quarterly and therefore does not take into account this monthly evolution. In addition, the restrictions that have weighed on the banks since January 1, with the obligation for banks to limit the financing that does not fit the nails in terms of the debt ratio and the duration limit even the credit faucet. Customers who could have been financed yesterday may therefore find themselves excluded from the market. According to Meilleurtaux, 3 out of 10 cases exceed 35% of the debt. For its part Cafpi believes that these tax increases should “normalize the market”. In addition, “to remain competitive, banks must continue to offer attractive real estate rates to individuals after an absolute record of sales in 2021.”
Increased competition on motor insurance
In addition, other changes have marked the mortgage landscape, and can explain this rise in interest rates (in addition to the increase in the 10-year OAT that serves as a benchmark), these are the mutual insurance reform that allows mortgage holders. put your insurance back into competition at any time from June 1. This should lower the banks’ margins for this type of product for which they are in a quasi-monopoly situation.
Thus, while the war in Ukraine has not yet had a direct impact on the real estate sector, vigilance is still necessary, especially regarding loan rates. “To date, none of our banking partners have mentioned the conflict in Ukraine to justify the latest rate hikes. On the other hand, there is clearly an impact from the increase in government loan rates , which could continue to grow significantly in the event of economic consequences for France or involvement in the conflict that could increase the risk for investors and increase the rate of government bonds”, analyzes Sandrine Allonier.
On the price side, the increase could be more limited in 2022, although a break has already been observed since the beginning of the year, especially in Paris where prices have also fallen by almost 2% in a year