“There’s always time” to borrow before the rate increase “at 2% at the end of the year”, explained Friday, May 13 on franceinfo Sandrine Allonier, director of studies at Vousfinancer, while the ECB increases interest rates. This increase has consequences for mortgages.
franceinfo: Is it still time to embark on a real estate project?
Sandrine Allonier: Yes, there is still time because although credit rates have increased by half a point since the beginning of the year, they remain attractive. Now, you can borrow at 1.5% in 20 years. We were at 1% in January but we can reach 2% at the end of the year with the evolution of the European Central Bank. So yes, at 1.5%, these are still historically low rates.
So shouldn’t it be late?
Yes, because with the increase in inflation, the evolution of the policy of the European Central Bank, the increase in government lending rates, the banks have no choice but to increase their credit rates they want to keep decent margins and continue to lend. Since the beginning of the year, the French have lost 10,000 euros in borrowing capacity. If you can repay 1,000 euros per month, you could borrow 217,000 euros at the beginning of the year, today it is only 207,000 euros, so you need to revise your real estate project down.
What about real estate taxes?
We had historically low rates for two or three years, but since the beginning of the year with the situation in Ukraine, the increase in government loan rates, inflation, the banks anticipate that the money that They will pay more. That is why they have no choice but to raise their taxes. But there is a huge amount of liquidity, savings, in the economy and the banks also want and must quickly to capture new customers. That is why they do everything to limit the increase in rates, but the policy of the European Central Bank risks having an additional impact on credit rates.
Will banks be less flexible in terms of deadlines?
They are already more attentive to the situation of the loan. When you borrow more than 20 years, the bank ensures that you can repay it within this period. They are more concerned about the distance between home and work because of the rising cost of gasoline. They are even more attentive to those who buy goods with works, since the prices of materials have increased by 18% since the beginning of the year. So today they have to look at the real estate project as a whole, but it is also to protect the loans.
Can you play on the length of the loan to reduce its cost?
Absolutely. We can go up to 25 years maximum loan duration, but we saw that in the last months the loan duration was already extended. With a rate that has increased by half a point since the beginning of the year, the loan of 200,000 euros costs 50 euros more per month. At the end of the year, we can reach 70 to 80 euros per month. So to absorb this increase we can extend the duration of the loan.