Mortgages: A Window of Opportunity This Summer, Before Rates Come Under Pressure in the Fall

Mortgage rates stabilized in July, averaging 3.31% for a 20-year term, according to the broker CAFPI. But with the rise in the Livret A interest rate, a 10-year OAT yield back above 4%, and the ECB potentially tightening policy on September 10, this lull may not last through the summer.
 

Borrowers who finalize their applications this summer are in a pretty good spot. In July, the brokerage firm CAFPI negotiated average rates for its clients of 3.16% over 15 years (down one basis point, or 0.01 points), 3.31% over 20 years, and 3.43% over 25 years. The most attractive borrowers—those with a combination of comfortable incomes and a substantial down payment—are getting significantly better rates: 2.98% over 15 years, 3.10% over 20 years, and 3.20% over 25 years. Following an initial lull between May and June, July confirmed that rates have stabilized, with even slight downward adjustments at some lenders, the broker notes.
 

This lull is largely due to the European Central Bank. On July 23, the Frankfurt-based institution left its key interest rates unchanged, after raising them in June. This decision was expected by the markets, but it matters to prospective homeowners: French banks refinance themselves in part through the ECB, and this pause gives them some clarity on the cost of their funding. They therefore have no immediate reason to tighten their lending rates. On the contrary, they remain on the hunt for new customers and, as CAFPI notes, are strongly committed to financing real estate projects. For borrowers currently in negotiations or about to finalize their purchase, the window of opportunity is wide open.
 

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Several signs, however, suggest it’s best not to wait too long. Inflation, for one. It is slowing in the eurozone, having fallen from 3.2% in May to 2.8% in June according to Eurostat, but remains above the ECB’s target. This is therefore insufficient to expect a sustained easing of monetary policy. The geopolitical context, which continues to weigh on major economic balances, could even prompt the ECB to raise its key interest rates again at its September 10 meeting, according to CAFPI.
 

Next, the Livret A savings account. Its interest rate will rise from 1.5% to 1.7% as of August 1. This is good news for savers, but less so for prospective borrowers: Livret A deposits are among the funds that banks use to make loans. When the interest rate on these deposits rises, it automatically becomes more expensive for banks to raise funds, and this additional cost generally ends up being passed on in loan rates, with a lag of a few months.
 

Finally, the 10-year OAT is the most serious indicator. This bond represents the rate at which the French government borrows over a 10-year term, and banks use it as a benchmark to set their own terms. On the morning of July 23, it crossed the 4% threshold—a first since 2009. The rate has risen by more than 0.70 percentage points in one year, which in turn makes it more costly to finance public debt equivalent to 117% of GDP. As long as the OAT remains at this level, mortgage rates are unlikely to fall, the broker warns.
 

In Rennes, 3.90 m² less than a year ago
In practical terms, what can people still afford? To gauge this, CAFPI calculates each month the amount of living space a household can purchase in major cities with a monthly payment of 1,000 euros over 25 years, based on the average interest rates the broker has obtained. Like interest rates, this real estate purchasing power is stabilizing this summer, notes CAFPI. Year-over-year, however, the trend remains negative almost everywhere. Rennes shows the sharpest decline, with 3.90 m² less. Marseille follows at -3.05 m², then Toulouse at -2.37 m². The decline is more modest in Strasbourg (-0.58 m²) and Montpellier (-0.42 m²). Bordeaux is the exception: it is the only major city where housing purchasing power has increased year-over-year, by 0.44 m².
 

The broker’s message can be summed up in one sentence: current conditions are not guaranteed beyond the summer. A prospective buyer currently in negotiations would be wise to sign before September, even if it means renegotiating their loan later if rates eventually fall. Nothing obligates the ECB to act on September 10, and banks may choose to trim their margins to continue attracting customers. But with inflation still above target, higher returns on regulated savings accounts, and OAT yields at a 17-year high, the natural trend in loan rates is now heading upward. The summer window is open. No one knows how long it will remain open.