Are we heading into a period of falling mortgage rates?
Are we heading into a period of falling mortgage rates? This is the growing view among many mortgage brokers, who are observing an overall stabilization—and even some declines—in mortgage rate schedules. The question is whether this trend will gain momentum in 2024.
"The peak of the interest rate hike is already behind us," says the mortgage broker Vousfinancer, noting that a major national bank has just lowered its rates for the best borrowers, even dropping below the 4% mark for a 20-year term.
The year 2023 is closing with average 20-year interest rates around 4.2% or 4.3%, which is 2 percentage points higher than a year ago. Mortgage brokers estimate that rates will level off around 4% in 2024, allowing the most creditworthy borrowers to secure a 15-year fixed-rate mortgage at 3.8%, while those with less favorable credit profiles will face a maximum rate of 4.5%.
Furthermore, lending professionals anticipate a more pronounced drop in rates depending on the decisions of the European Central Bank (ECB). However, banks—which are regaining profit margins on mortgage lending—are seeking to rebuild their customer base without letting their guard down regarding lending, which is closely monitored by financial authorities.
According to the Banque de France, this has led to a rebound in credit issuance in the final months of the year, reaching 9.8 billion euros.
To stimulate this recovery, banks are actively strengthening certain measures to support borrowers, such as the zero-interest loan (PTZ). The government recently raised the limit for this program to 100,000 euros, though it is restricted to certain residential areas. Banks such as Crédit Agricole and Caisse d’Épargne are even offering additional loans of up to 20,000 euros under the same terms. At Caisse d’Épargne, this offer can be combined with an adjustable-rate loan for people under 35, which adjusts monthly payments based on changes in income.
Another sign of a market recovery is the Banque de France’s confirmation that the usury rate will once again be calculated on a quarterly basis starting January 1, 2024. This measure, which sets the maximum rate above which banks cannot lend, will switch to a quarterly basis following an exceptional period of monthly publication due to the rapid rise in the ECB’s key interest rates. The usury rate for mortgages with terms of 20 years or more will reach 6.29% on January 1, a level not seen since 2012. The spread between this rate and the average effective annual rate charged by banks is now 157 basis points (4.72%). Over the past twelve months, the usury rate for such a loan has risen by 270 basis points.
