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1.88%: here is the average interest rate for a mortgage in September according to the CSA Housing Credit Observatory. A figure up sharply compared to last year… until when?
While interest rates for home loans have been particularly low for several years, their rise is worrying the French and the real estate world. Against a background of inflation and uncertainty, the European Central Bank has in fact raised its key rates, leading in its wake to an increase in the rates charged by the banks. Borrowing thus becomes more expensive, and the borrowing capacity of households suffers. Update on the current situation in detail.
Some interest rates have doubled in just one year
In September 2021, the average interest rate on mortgages, all terms combined, was 1.04%. The CSA Housing Credit Observatory, at the origin of this figure, renewed its analysis in September 2022. Result: it is now necessary to count 1.88% on average for a mortgage, all durations combined.
In detail, the average rate of loans granted over a period of 25 years is now 1.98%, compared to 1.16% over the same period in 2021. Over 15 and 20 years, the situation is even worse, the rates interest having doubled in the space of a year. Over 15 years, it is now necessary to count 1.74%, and 1.88% over 20 years.
And the most modest households are not the only ones affected by this increase. It concerns the entire market, directly linked to the rise in key rates by the European Central Bank (ECB), and particularly the 10-year OAT index. This indicator serves as a reference for banks to determine the interest rates they can charge. What was behind the ECB’s decision? Inflation, which reached 5.6% over one year in France, and 10% in the euro zone as a whole.
Read also: Real estate credit: extending the repayment period is no longer enough to have your file accepted
Will mortgage rates be able to rise indefinitely?
Many French people ask themselves this question. Future borrowers, first of all, who legitimately fear for their borrowing capacity, but also the world of real estate, which risks finding itself faced with a market operating in slow motion. According to projections by the CSA Housing Credit Observatory, the average rate of mortgages, all durations combined, could reach up to 2.80% in June 2023, against 1.88% currently. However, this trend should gradually reverse to reach 2.45% at the end of 2023, then a certain stability in 2024.
These quantified elements remain projections closely linked to the evolution of the French and European economic situation, as well as to inflation. In the meantime, borrowers do not have an expandable borrowing capacity, particularly given the high real estate prices. They can therefore choose to borrow over a longer period, with a maximum of 25 years in most cases. The average duration of loans granted thus stood at 20.3 years in the third quarter of 2022, compared to 13.6 years in 2011.
Another option: buy a property with a smaller surface area. Indeed, for the Observatory, “this extension is no longer sufficient to offset the consequences of the rise in housing prices”. Thus, in one year, the surface that a household can acquire has decreased by 4 m² on average. However, this situation could well change in the months to come. Indeed, with the reduced borrowing capacity of future owners, current sellers may have to lower their requirements, which could lead to lower property prices. The rating agency Moody’s comes to a similar conclusion: “As mortgages become more expensive, housing demand will fall, probably leading to an easing of house prices after several years of growth.”
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