Home Savings Plans: The 1.75% Return Makes Them Less Attractive

Starting January 1, 2025, the interest rate on new Home Savings Plans (PEL) will be reduced to 1.75%, compared to 2.25% for those opened in 2024. This product, once highly popular for saving toward a real estate project, is now struggling to attract customers in the face of more appealing alternatives, such as the Livret A or the LEP. Philippe Crevel, Director of the Cercle de l’Épargne, analyzes the reasons behind this decline in popularity.

A Negative Real Return
The PEL offers a fixed interest rate for its entire term, which can be up to 10 years. However, this feature, which was once attractive, has now become a drawback. With a gross rate of 1.75% starting in January 2025, and after deducting tax and social security contributions (a single flat-rate levy of 30%), the net return drops to 1.22%. By comparison, the projected inflation rate for 2025 will exceed this return, resulting in a loss of purchasing power for savers. “The PEL is becoming a product with a negative real return,” notes Philippe Crevel, while other regulated savings products such as the Livret A—even after an expected rate cut to 2.5% in February 2025—will remain more advantageous.

A Marginal Role for Real Estate
In addition to its savings function, the PEL offers the option of taking out a fixed-rate mortgage. However, the decline in returns also affects the interest rate on associated loans, which will drop from 3.45% to 2.95% in January 2025. This decrease might seem advantageous, but its impact remains limited for several reasons:
 

1. A four-year waiting period: Loans are available only after four years of saving.
 

2. A limited amount: The loan amount depends on the accrued interest, which will now be lower.
 

3. Reduced competitiveness: In a market characterized by fluctuating interest rates, the PEL loan struggles to compete with traditional loan products.
 

The PEL, once designed to facilitate the purchase of a primary residence, no longer plays this role to any significant extent. “Its overhaul, promised for several years now, is no longer on the agenda, even as the real estate sector is undergoing a major crisis,” laments Philippe Crevel.

A product in decline
Interest in the PEL has been steadily declining since 2018. Between January 2018 and October 2024, its outstanding balance fell from 270 billion to 224 billion euros, according to the Banque de France. This trend reflects the erosion of its relevance in the face of higher-performing savings products and an economic policy that has not fostered its modernization.

What role will the PEL play in the future?
In an economic climate marked by uncertainty and a persistent housing crisis, the PEL seems to be drifting away from its original purpose. With uncompetitive savings rates and loans that are difficult to access, this nearly 60-year-old product is now searching for a new purpose. An ambitious overhaul would be necessary to restore its central role in home purchases, but no such initiative is currently planned by the government.