Mortgage Rates Cross the 4% Threshold
As has been the case every month since last January, the Banque de France has updated the usury rates. Consequently, for loans with terms of 20 years or more, banks can charge up to 5.56% (+0.23% compared to August) to finance their customers’ real estate projects.
If the rise in the usury rate continues at its current pace, the usury rate (for loans with terms of 20 years or more) could exceed 6% as early as next December.
The rise in usury rates prevents the applications of borrowers seeking a mortgage from being put on hold. But it does not stop rates from continuing their runaway rise.
According to the broker Cafpi, “Summer is always a unique time for bank interest rates. As such, we’re seeing that they’ve remained stable compared to last month. In fact, most of our banking partners are maintaining their August rates for much of September. ” This allows borrowers with the highest incomes to secure, in certain regions, very attractive rates still below 4%: 3.30% over 15 years, 3.49% over 20 years, and 3.58% over 25 years.
Artemis Courtage makes the same observation, noting that “after a slight lull in August, some banks are already announcing substantial rate hikes ranging from 0.15 to 0.35 percentage points.” And this trend is expected to continue in the fourth quarter: while rates currently average 4.15% for a 25-year term, all signs point to them reaching 5% by the end of 2023. ”
How high will rates go? This will depend on the ECB’s continued monetary policy, and in particular on its inflation forecasts for the end of the year. The European Central Bank’s next meeting, on September 14, will provide an indication of interest rate levels for the end of this year and next year.
What is certain is that the ECB’s eight most recent hikes in key interest rates over the past few months will cause interest rates to peak at around 5% as early as 2024.
In light of the latest interest rate hikes, some major banking networks are once again incorporating consumer lending into their strategies. It therefore makes sense for borrowers to launch or resume their real estate projects. Mortgage rates around 4% are attractive; it’s worth remembering that in the 1980s, double-digit interest rates were the norm—17.6% in 1981, for example (source: Observatoire Crédit Logement/CSA). Borrowing at rates higher than inflation is not unusual either; for example, in the 2000s, interest rates were around 5% and inflation was below 2% (source: Banque de France).
