A rise in mortgage rates threatens to weaken the sector as a whole

In spring 2021, a rise in mortgage rates in France was inevitable! Since the announcement of Joe Biden's US stimulus plan, the threat of a return to inflation has hovered over international markets.

A rapid start to an economy ravaged by the crisis often results in a rise in bond rates in order to encourage investments in government bonds, which have become more profitable. This rise in interest rates on US bonds had, from March 2021, a direct impact on the European bond market. This is now reflected in a general tension on rates, especially on the mortgage market.

In April 2021, La Centrale de Financement noted an increase in mortgage rates of 0.04%, on average, over all loan terms. An increase to which is added a continuous loss of household purchasing power, a shortage of goods for sale on the market and the still rigorous application of the recommendations of the High Council for Financial Stability (HCSF) on the granting of credit . The Financing Center therefore warns of the certain increase in the number of credit refusals in the coming months, risking again penalizing first-time buyers and destabilizing the sector as a whole ...

If the general levels of mortgage rates remain attractive despite everything, their recent increase has taken place in a particularly tense and already drastic context with regard to the granting of credit, due to:

a shortage of real estate for sale (in old as well as in new), which tends to reinforce the tension weighing on the mortgage market and on the price of goods, in particular in new buildings (particularly affected by the decrease of the number of building permits granted). The new home market is also likely to be impacted by the new RE2020 energy regulation, which will come into force in the summer of 2021, and which should further increase the construction costs of real estate ...

“The increase in the prices of goods naturally implies a decrease in the volume of loan requests, in particular from the most modest households whose income no longer allows them to position themselves on the market. ", explains Sylvain Lefèvre, President of La Centrale de Financement.

the maintenance, by the High Council of Financial Stability (HCSF), of restrictive criteria vis-à-vis the granting of mortgage loans (35% maximum debt, including the cost of borrower insurance, and a term maximum loan of 27 years, for new real estate) which automatically reduce the volume of loan applications accepted by banks.
the approximation of mortgage rates to usury rates [1], generating a scissor effect [2] particularly detrimental to the most modest borrowers or considered "at risk" by insurers, and whose case requires negotiating higher interest (including banks and loan insurance) ...?
increased vigilance of banks vis-à-vis mortgage applications; in an economic context weakened by the crisis, banking establishments examine loan files with close attention and require additional guarantees to ensure the solvency of borrowers. The amount of personal contributions increased by more than 20% between the first and the second half of 2020, according to the figures of the last annual study carried out by La Centrale de Financement [3].

"This rate hike, after a particularly advantageous period for borrowing, takes place in a context that is still as restrictive with regard to the granting of credit and in a lasting inflationary trend, which threatens purchasing power. borrowers ... We anticipate a significant increase in the number of credit refusals in the coming months, to the primary detriment of the most modest borrowers, in particular first-time buyers, and risking weakening the sector as a whole! "Sylvain Lefèvre, President of La Centrale de Financement

May 2021: a rise in rates over all loan periods

After a slight drop in rates in April 2021, the month of May begins with a further increase, across all loan terms. Thus, with the rates announced in May 2021, a borrower taking out a loan in the amount of € 180 over 000 years at 25% will see his monthly payment rise to € 1,28 for a total cost of credit of 701,46 30 euros, or 438% more than the previous month (corresponding to an additional cost of more than 5 euros) for a loan of the same duration and the same amount.

Rate development

May 2021 average property rates by loan term

The interest rate conditions generally observed are up 0.04%, on average, for all loan terms combined. In detail: the most significant credit rate increases are observed mainly for loans contracted over 7 years, 12 years and 25 years, with an increase of 0.05% and 0.06% respectively compared to April 2021.

The best real estate rates of May 2021 by loan duration

The best rates obtained in May 2021 are, for the majority of loan terms, stable and identical to those obtained in April 2021. For loans contracted over a period of 15 years, the credit rates are nevertheless up by 0,03% compared to those obtained in April; for loans contracted over 20 years, the best rates obtained in May 2021 are more advantageous than those of the previous month, with an observed drop of 0,04%, on average.