Unsurprisingly, mortgage rates have gone down again. The results of the Good Finance observatory study clearly show the arrival of first-time buyers on the market.
At Good Credit, we note that around thirty banks have already lowered their rate scales, particularly for high-profile individuals. The year 2020 should be as good as 2019 if not more because in addition, real estate prices should continue to fall.
Mortgage loan rates that are going back down
A known and expected phenomenon
Youfinancer had already announced a possible fall in borrowing rates some time ago. It is now recorded, in particular through the monthly report of the observatory formed by the survey company CSA, and the guarantee body Good Finance. The latter guarantees most French home loans, so its figures are representative of the market.
According to the observatory, in November the average rate excluding fees dropped from 2.22% to 2.20%. A seemingly small adjustment, but much more important in reality.
Because this average is due to the arrival of first-time buyers on the borrowing market, who are granted attractive rates, but not as much as those to which a second-time buyer can claim.
Especially for the best profiles
Sandrine Alonier, head of bank relations at Good Credit, confirms: “If the banks are not more selective at the end of the year, some are clearly positioning themselves in order to win over targeted customers by offering very attractive rates over long periods short – less than 2% over 15 years – and for the highest income brackets. The other borrowers also benefit from lower rates, but to a lesser extent… ”.
Today the average remains at 2.20% over 15 years, 2.55% over 20 years and 3% over 25 years. For its part, the Good Finance observatory classifies borrowers into 4 quartiles. The first group is that of the best profiles, who on average borrow at 2.29% over 25 years.
Clearly, a good part of the borrowers with the best profiles was able to borrow below 2.29%. Regarding the 4th group, that of the least interesting profiles for a bank, the performance remains remarkable. With an average of 3.09%, many of the borrowers in this group were able to borrow at around 3% or even below.
Financial markets in great shape
When banks play the game fully
As of December 2014, we knew that 2019 would be a good year for the real estate market. It was at this time that the banks announced their intention to support the sector, in particular through rate cuts. Because we already knew that the ECB (European Central Bank) was going to indulge in an ultra-accommodating monetary policy, flooding the coffers of the big treasury brands.
However, the Basel agreements now oblige banks to maintain a certain level of capital. And to get there, nothing beats the consumption of banking products, via new customers that we attract precisely thanks to the mortgage.
And the result is there: at the end of November, the number of mortgage loans granted jumped by + 33.1% in 1 year. To not spoil the banks have not hesitated to put their hands in the pocket, with an overall amount loaned up + 39.4% over the same period.
Even better in 2020
The year 2020 should be just as good or better because we already know that the banks have set the same objectives as those of 2019. In addition the director of the ECB, Mr. Mario Draghi recently announced its intention to use powerful new tools to boost growth in the eurozone.
If this measure has been received with little enthusiasm by the stock markets, however, the banks know what to expect. And even if the American central bank, the Fed, could raise its key rates before the end of the year, mortgage conditions will remain excellent in France.
And in addition, France borrows cheaper
Historically, mortgage rates have always been linked to changes in 10-year OATs. Bank analysts use the yield on these 10-year repayable government bonds to determine their rate schedules. When last spring the ECB’s monetary machine started up, the conditions of the banks were somewhat detached from the evolution of these famous OATs.
Since the rate hike that began this summer, the curves have come together again. And precisely, in November France was able to borrow below 0.9%, allowing the banks by ricochet effect to lower their mortgage rates.
And precisely the announcement of the director of the ECB should encourage this trend because the promise of easy and cheap access to finance for banks is a reassuring sign for anyone wishing to legend to France.
Real estate prices falling further
The conjuncture note drawn up by notaries and INSEE reports an increase in property prices in the 3rd quarter. This adjustment reached + 0.5% across France after the market suffered an equivalent drop in the 2nd quarter.
If the phenomenon is observed as much in Île-de-France as in the provinces, in 1 year the price of houses and apartments remains in decline. In the Paris region, the index stood at -1.2% in the 3rd quarter, after losing -2.5% in the 2nd quarter. In addition, prices fell more on apartments (-1.3%) than on houses (-1.1%).
In the provinces, apartments even lost -2.1% in 1 year, while house prices fell -1.4% over the same period. And the notaries have warned: the rise in prices observed at the start of the school year, particularly in Île-de-France, will stop there. Many voices are raised to remind that property prices are too high in France and that a downward adjustment is expected for 2020.
Good conditions therefore to borrow this year, but Jérôme Robin, president and founder of Good Credit tempers: “2020 should, therefore, be a very good year to become a homeowner, thanks to the very low level of interest rates, but also thanks to the extension of the zero-interest loan which should contribute to the return of first-time buyers to the market. However, a real recovery in the real estate market will only be possible with a sustainable return to growth and jobs, essential to restoring confidence in the most vulnerable households in the future. “