Rising mortgage rates: collateral damage of the trade war?

"The war launched by the American administration has had an impact; it adds an additional layer of uncertainty" to the French mortgage market, said Michel Mouillart, professor of economics in charge of presenting the CSA/Crédit Logement observatory, on Thursday.

He expects "a slight rise" in mortgage rates between April and June, to 3,25%, compared to 3,16% in the first quarter, potentially the first after more than a year of continuous decline.

"This small late-spring boost is a bit of a logical response" from banking institutions' risk departments to a more uncertain economic environment, explained Mr. Mouillart, particularly since the trade war unleashed by the Trump administration.

The latter participated in the rise in France's 10-year borrowing rates in March, to peaks not seen since 2011.

The banks, which are partly financed at this rate, therefore corrected the situation in April and increased their rates.

The inflationary risk of the trade war also removes the prospect of a more significant drop in the European Central Bank's (ECB) key interest rates, another key element of bankers' financial balance, Mr. Mouillart analyzes.

Shared observation

"Real estate loan profitability indicators, however you look at them, have been showing a deterioration" over the past six to eight months, Mr. Mouillart said.

Attentive to their margins, "credit institutions are businesses like any other," he recalled, and even "much more exposed than others to disruptions in the international environment" and "international financial markets."

Brokers, at the forefront of this market, also noted this new reluctance when they received the banks' scales for the month of April.

"Faced with international tensions affecting financial markets, some banks are planning to increase their rates in April 2025," noted the broker Cafpi, for example.

"After a lull in March, some banks are increasing their lending rates, in line with the rise in government borrowing rates that has occurred in recent weeks," adds its competitor Vousfinancer.

The "small bump" in mortgage rates expected for the second quarter would be "ephemeral," Mr. Mouillart cautioned, before stabilizing at around 3,05% at the end of the year and in 2026.

Cost of money

This observation contrasts with the statements, admittedly a few weeks older, made by the Governor of the Bank of France, François Villeroy de Galhau.

Speaking to Radio Classique at the beginning of March, he saw "many positive signs" for mortgage lenders thanks to the European Central Bank's (ECB) rate cuts. The ECB lowered its rates again on Thursday.

However, the volume of new mortgage loans tends to stagnate at around 10 billion euros each month, according to the latest data from the Banque de France, which ended in February.

The rates advanced by Crédit Logement are also exclusive of fees and insurance.

All fees included, rates reached 3,98% for a term of twenty years or more in the first quarter of 2025, according to the Banque de France.

For 100.000 euros borrowed over 20 years, you should expect to pay around 45.000 euros in credit costs over the term of the loan.

With real estate prices falling only slightly over the same period, the economic equation is complex for potential property buyers.

This does not improve the possibility given to departments to raise the ceiling on transfer taxes, or "notary fees", except for first-time buyers.

The volume of new real estate loans fell last year to its lowest point since 2014, according to the Banque de France.

Illustrative image of the article via Depositphotos.com.