Mortgage Rates: The Real Estate Market Withstands Political Instability

The vote of no confidence, followed by the government’s resignation, has raised questions about the economic future, particularly in the real estate sector. However, while some fear that political instability will lead to an increase in mortgage rates, several factors suggest that these rates will remain generally stable in the coming months.

Political instability, but limited impact on mortgage rates
Historically, mortgage rates have been influenced more by decisions of the European Central Bank (ECB) than by the domestic political situation. The recent dissolution of parliament last June and the early parliamentary elections did not lead to a significant increase in mortgage rates. As a result, recent events, while concerning, are not expected to have a major impact on borrowing conditions.
 

Furthermore, financial markets react to global factors—such as the European economic outlook or inflation levels—rather than to isolated domestic political crises. As a result, experts say the impact of the government’s collapse on interest rates appears to be limited.

A Current Downward Trend in Rates
In early December, mortgage rates began to decline slightly, falling below the symbolic 3% threshold for 20-year loans for the strongest applicants. This downward trend is allowing many borrowers to significantly reduce their monthly payments.
 

Let’s take the example of a 250,000-euro loan over 25 years: with a current average interest rate of 3.35%, the monthly payment is 1,230 euros, compared with 1,425 euros a year ago, when rates were around 4.75%. For a 400,000-euro loan, the monthly payment is now 1,970 euros, compared to 2,280 euros in December 2023. These differences, which sometimes amount to several hundred euros per month, offer some breathing room to first-time homebuyers.

Banking Competition That Benefits Borrowers
Despite economic uncertainties, banks continue to lend actively. They are seeking to meet their business goals, which is prompting some to offer competitive rates to attract new customers. This dynamic creates a favorable environment for borrowers, who can benefit from advantageous loan terms.
 

However, the influx of buyers, attracted by these low rates, limits the room for negotiation on real estate prices. As a result, transactions are taking place in a market where sellers have the upper hand, but where financing terms remain attractive for buyers.

What’s in store for the coming months?
Although the political future remains uncertain, mortgage rates are expected to remain stable in the short term, barring any major decision by the ECB. According to Ludovic Huzieux, co-founder of Artémis Courtage, “banks continue to lend actively, and borrowers are benefiting from increased competition among lenders, which is stabilizing rates.”
With rates currently averaging between 3% and 3.5%, the real estate market remains buoyant. The coming months will be crucial for assessing the impact of political decisions on the sector. But for now, the situation remains under control, offering borrowers a window of opportunity to finance their projects under favorable terms.