Rising real estate interest rates: 5 % next year?

The pace of mortgage lending has continued to rise since the European Central Bank sharply raised interest rates last year. And these interest rate hikes will continue until inflation is contained by the European Central Bank. In other words, the longer you wait, the more expensive mortgages will become.... It also means that the ability to get a loan decreases over time.

In fact, a 1% rate increase is about a 20% deterioration in the ability to get a loan when you have 35% debt. Currently, the best rate offered by Helloprêt, for example, is 3.33% for 20 years. Diagnosis: "The time when you could get rates below 1% is (for now) gone!"

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At the end of August 2023, the average mortgage rate was already 3.80% for 20 years. The Home Loan Supervisory Center / CSA notes an increase in the base loan rate for all mortgages, regardless of maturity or borrower profile. For example, at the end of August 2023, the average mortgage rate was already 3.80% for 20 years (up from 2.62% in January 2023). The average rate corresponds to the nominal rate to which must be added the insurance premium, bank charges and security fees, i.e. the Annual Percentage Rate on the Loan (APR), which is the actual cost of the mortgage loan.

This rise in rates makes it harder for families to access credit and contributes significantly to the housing crisis we've been deepening for months now. A cut in the European Central Bank's key rates does not necessarily mean lower lending rates. "Inflation should slow down and France could even experience a recession in 2024, which would force the ECB to maintain or even cut its key rates," predicts economist Marc Tuaty of the ACDEFI cabinet. Eurosystem experts predict it should gradually slow down in 2023, reaching 3.4% in 2024 and 2.3% in 2025, prompting the ECB to end pressure through interest rates. But note: a possible cut in the ECB's key rates does not necessarily mean lower lending rates. "In 2011, lending rates stabilized for a long time, I think we can repeat this situation," reminds Mael Barnier of MeilleurTaux.

In the meantime, mortgage rates are now at 3.8% and will continue to rise in the coming months, reaching at least 5% in 2024, according to PAP. And in 2025, the ECB's key rates, and hence the rates offered by bankers, will start to fall. In the opinion of Eric Heyer of OFSE: "We can expect a rate cut once the 2% inflation target is reached."...