The interest rates offered to real estate borrowers are becoming lower. They continue to descend and reach historically low levels. This “good news” may well have a setback for seniors and other “at risk” borrowers and for the real estate market itself.
Rates that continue to fall
The 28th credit observatory of MeilleurTaux.com has just been published and it reports ever lower rates. One bank out of four offers interest rates between 1.3 and 1.5% and some even offer lower rates, between 1.1 and 1.3%. The average rate posted for a 20-year loan is set at 1.55%. With such rates, it is now possible to obtain a mortgage of € 206,000 for a monthly repayment of € 1,000 . Ten years ago, the amount of the loan was capped at € 148,000 for an identical monthly payment.
Rising prices and rising real estate buying power
For the past 10 years, prices have risen sharply , in line with falling real estate interest rates. Yet, overall, real estate purchasing power has not diminished . With an iso-monthly payment of € 1,650, it is possible to buy 75 square meters more than 10 years ago at Le Mans or Saint-Etienne. But this is not the case in all cities, some losing, on the contrary, square meters:
- – 25 m² in Bordeaux,
- – 15 m² in Lyon,
- – 9 m² in Srasbourg,
- – 7 m² in Rennes.
With an iso-monthly payment of 990 €, the difference over 10 years is less, but it is still there:
- + 48 m² at Le Mans and Saint-Etienne,
- – 14 m² in Bordeaux and – 9 m² in Lyon.
A rather mixed news
If lower interest rates appear to be good news, look closely, this may not be the case for all borrowers. Indeed, the rate of wear , in parallel, continues to decrease and is established, also at a very low level. However, a low attrition rate results in more and more frequent refusals of real estate loans of a small amount or for short periods . It is seniors who have to suffer, forced to borrow on longer terms, or rejected because of the high rate of insurance borrowers. It also affects low-income households , who can benefit from assisted loans, which imply a reduction in the duration of the main mortgage. They will probably have to give up the loans to get a classic home loan at a rather low rate.
In the end, the steady decline in interest rates is not such good news, leaving behind excluded real estate credit . In order to claim access to low-rate loans, it will be necessary to show off with a concrete file, a stable situation both professionally and in the family, sound accounts and a good personal contribution, if possible in savings.
To learn more about the impact of very low credit rates
To listen: the podcast “C’est ma maison” of Sunday, March 24, 2019 Radio France / Franceinfo where Charlie Cailloux, legal adviser for the real estate site PAP.fr, explains why a very low borrowing rate is not always good news for borrowers.