When will the rise in borrowing rates stop? Month after month, since the spring of 2022, mortgage rates have continued to rise and nothing says that this increase will end soon. In May 2023, the average rate reached 3.28%, compared to 3.16% in April, according to the Observatory credit housing / CSA. For a twenty-year loan, the borrowing rate is 3.38%.
With L’Express, Maël Bernier, director of communication and spokesperson for Meilleurtaux, specifies that the average rate is 3.75% for a loan of twenty years, according to the scales displayed at the beginning of July by the banking partners. of the brokerage group. The average rate over twenty years is now between 3.65 and 3.95% and the rate reserved for the best profiles between 3.04% and 3.62%, observed for its part Empruntis on June 19.
The 4% bar should therefore be quickly crossed, probably as early as September, indicates Maël Bernier. “The consequent increase in the rate of wear mechanically suggests a significant increase in interest rates in the months to come”, explains to L’Express Yann Jéhanno, president of the real estate network Laforêt France. The attrition rate in fact crossed the 5% mark (5.09%) on July 1 for fixed-rate loans with a duration of twenty years and more. A record since 2014.
This ceiling rate for new mortgages, set by the Central Bank on the basis of the rates charged by the banks, is intended to protect the borrower against over-indebtedness. It includes all the costs of a home loan, including the credit rate, borrower insurance and any broker commissions.
The “brutality” of the rate hike
The days when borrowing rates hovered around 1% at the start of last year seem to be a distant memory. “The debate is not so much about the level of interest rates as about the brutality of the rise in these rates, which has broken the fluidity of the market. This is above all what destabilizes sellers and buyers”, notes Yann Jehanno.
Interest rates above 4% in the coming months? “It’s plausible,” says Yann Jéhanno. “Rates will continue to rise and we will probably borrow at 4.5% over twenty years by next January,” said Thomas Lefebvre, scientific director of Meilleurs Agents, in a press release. “We must still plan for new credit rate increases for the next three months,” comments Cécile Roquelaure, director of studies at Empruntis, also quoted in a press release.
Could the 5% mark, reached at the beginning of 2009, be crossed in 2024? Some professionals in the sector do not exclude it. “It is likely that we will see rates appear at 5% in early 2024 over certain durations”, anticipates Ludovic Huzieux, co-founder of Artémis brokerage, questioned by The echoes. “We can imagine loans at 5% by the end of the year”, also predicts with of the JDD Côme Robet, broker in the Nantes region and administrator of the National Chamber of Financial Expert Advice (CNCEF).
Other specialists are more cautious. “Inflation is starting to slow down, the ECB is slowing down its rise in key rates… Talking about 5% is therefore playing at scaring yourself,” says Maël Bernier, from Meilleurtaux, who is betting instead on a stabilization of interest rates. borrowing around 4%, a “level”. “I do not believe that we will reach 5%. Once inflation is under control, the rates will drop”, also advances to L’Express Julien Haussy, founder and director of Espaces atypiques. This network, launched in 2008, specializes in the sale of atypical properties, “favourites”, both houses and apartments (lofts, mills, barges, farmhouses, etc.).
Paradoxically, the rise in borrowing rates is not only bad news for buyers. “Some banking establishments which have not been lending for a year will be able to lend again from 4%”, judge Maël Bernier. Explanations: with this threshold, banks will once again be able to earn money on mortgages, which was no longer the case until now. In the space of a year, the number of real estate loans granted by banks to individuals fell by 30 to 40%.
“The banks won’t have much of a choice anyway: the complete closure of the supply of mortgages cannot last indefinitely,” said the spokesperson for Meilleurtaux, who also judges that it is better “a credit more expensive than no credit at all”. “Banks favor an acceleration of the rise [des taux]in order to find a healthier situation as soon as possible”, also notes Empruntis.
First-time buyers squeezed out of the market
The continuous increase in borrowing rates for more than a year, however, has negative consequences, in particular the reduction in purchasing power. With a rate of 3.4% over twenty years against less than 1% in 2020, the French have lost 5 square meters in six months and 12 square meters in one year, notes Meilleurtaux.
First-time buyers, whose projects are often conditional on the granting of a loan, are the first to be affected by the rise in interest rates and thus find themselves increasingly squeezed out of the real estate market. “First-time buyers represented more than 50% of purchases in 2019. Today, they only represent 27% of acquisitions. By the end of the year, it is to be expected that the proportion first-time buyers is falling further, while second-time buyers should continue to drive the market,” explains Yann Jéhanno, from Laforêt France.
Julien Haussy, of Espaces atypiques, also notes a drop in the proportion of first-time buyers since the rise in rates began. “The atypical properties that we offer are still popular, but the situation is more complicated than before,” he says. For its network, with 84 real estate agencies in 63 departments, this tougher market is reflected in a moderate drop in activity of minus 15% in one year.
Projects that need to be reviewed
The finding is similar for Laforêt: the volume of real estate transactions fell by 14% between the first half of 2022 and the first half of 2023, notes the agency network in its market trends post.
If they do not want to abandon their project, buyers are sometimes forced to review it. “Faced with the rise in rates and the decline in real estate purchasing power, it may be relevant to resize your project and consider certain concessions. For example, opting for a shower instead of a bathtub, accepting some renovation,” says Yann Jéhanno.
In addition, buyers do not hesitate to negotiate prices further with the seller. “Buyers want to negotiate the price even when they have a crush on a property. They are less afraid of losing the property”, notes Julien Haussy. “We see that buyers, who are looking to recover purchasing power, are more aggressive, while sellers, when they are forced to sell, are led to make additional efforts to facilitate transactions”, observes Yann Jéhanno .
A slight drop in prices
Trading margins are intensifying. The difference between the sale price and the purchase price is now 5.28% at the national level, an increase of 0.85 points compared to the first half of 2022, notes Laforêt: “This level negotiations illustrates increased pressure on the part of buyers on sellers. In addition to the adjustments made during the sale, owners often have to make an extra effort to finalize the transaction.”
However, the prices still do not fall frankly. At Laforêt, we observe “a slight decline” in prices per square meter in the first half of 2023 compared to the first half of 2022. The fall in prices is indeed 2% at the national level over one year, while, over the last six months , prices fell 1.1%. “Overall, there are fewer offers than requests, so prices are not faltering”, underlines Yann Jéhanno. This decrease, far from being spectacular, is largely insufficient to offset the rise in borrowing rates.
Despite the current difficulties, Julien Haussy, from Espaces atypiques, prefers to remain optimistic. “If you have the means to buy or change your home, you have to do it today, even if the rates are at 4%”, he underlines. The founder of the first network of real estate agencies specializing in atypical properties advises finding properties with “potential” and/or “well located”. A “wise” purchase, he says. Perhaps taking a little more time for reflection than before.