The Resurgence of Borrowing in France: A Ray of Hope for the Real Estate Market?
During an interview broadcast on France 2’s 8 p.m. news, the governor of the Bank of France, François Villeroy de Galhau, announced a significant drop in interest rates on new mortgages. In November, these rates fell below 3.4%, down from 3.51% in October.
"We will soon be releasing the interest rate figures for November: on average, mortgage rates—which were over 4% a year ago—have fallen below 3.4%," said François Villeroy de Galhau. "That’s a sharp drop. In fact, the French are starting to borrow again. This is good news for a gradual recovery in the real estate market."
During his New Year’s address, the governor also raised the possibility that the European Central Bank (ECB) might lower its key interest rates to a level close to 2 percent by next summer, as inflation continues to decline. This trend could prompt French banks to reduce lending rates even further, thereby making mortgages more attractive.
A Tentative but Encouraging Recovery
Despite this positive trend, the recovery remains moderate. So far, mortgage rates, although declining, have fallen only slightly. Between September and October 2024, they fell from 3.56% to 3.51%, according to figures from the Banque de France. This level remains high compared to the first quarter of 2022, when average rates stood at 1.80%. Including fees and insurance, rates for loans with terms of 20 years or more still reached 4.39% in the third quarter of 2024.
However, this recent drop in interest rates seems to be giving the market a bit of a boost. In October, the total amount of new mortgage loans once again surpassed the 10-billion-euro mark, reaching 10.4 billion. This figure marks a notable recovery from the low point observed in March 2024. Despite this improvement, 2024 could be one of the weakest years in terms of mortgage lending in the past decade.
Uncertainties Still Persist
While this trend is promising, the real estate market remains weighed down by economic and political uncertainties. The wait-and-see attitude of buyers—whether first-time buyers, repeat buyers, or investors—continues to hinder the sector’s full recovery. This climate is weighing on purchasing decisions, with consequences for the entire real estate industry.
Despite these obstacles, falling interest rates could act as a catalyst in the coming months. “We are hopeful that this trend will continue,” concluded François Villeroy de Galhau. It remains to be seen whether this lull will be enough to reverse the trend in a lasting way in a sector that is still recovering.
