Mortgage loan: first drop in interest rates in two years

Does this indicate a new trend? For the first time since the beginning of 2022, the average interest rate on new mortgage loans (excluding fees and insurance) has decreased by 6 basis points, reaching 4.11% in February compared to 4.17% in January 2024, the Bank of France reported this Monday, April 8. The volume of new mortgage loans, excluding refinancing, slightly decreased in February to 7.3 billion euros, down from 7.6 billion euros in the previous month. The volume has decreased threefold from the peak in spring 2022, which exceeded 22 billion euros. A direct consequence of the European Central Bank's policy is the significant reduction in mortgage lending: in 2021, a record year, banks issued (excluding refinancing) 244 billion euros, then 235 billion in 2022. In 2023, with a 40% decline, banks issued only 139 billion euros in loans. However, by making their lending conditions more attractive, banks hope to turn this austere page.

To revive the real estate market, according to the National Federation of Real Estate (Fnaim), sales indeed dropped by 22% in 2023.

To "revive the purchasing power in the real estate market for the French," Minister for Ecological Transition Christophe Béchu stated on January 31 in his New Year's address that he wants to "experiment with new financial instruments." To this end, the minister proposed to revive loans with repayment at the end of the term, which separate interest payments from capital repayment. These two types of loans are currently hardly commercialized by banking institutions in France. The Bank of France rather predicts stabilization or a decrease in real estate prices. However, this lever is not in their hands, and although there is a decline, it is not enough for a complete revival of the market.

However, the legislator has not yet had the final word. In an attempt to achieve a relaxation of the credit provision rules established by the High Council for Financial Stability (HCSF), the bill will be reviewed on Wednesday by the National Assembly committee. It specifically proposes to allow banks to deviate even further from one of its key rules, the maximum debt-to-income ratio for borrowers set at 35% of their income.