The maximum legal mortgage rate will increase on January 1 from 3.05% to 3.57% for a loan of 20 years and more, according to the notice published on December 28 in the Official Journal. The “wear rate” is intended to protect individuals from abusive borrowing terms. It caps all the costs of a home loan: credit rate charged by the bank, any brokers’ commission, borrower insurance, etc.
A favorable year for mortgages
The calculation is carried out each quarter by the Banque de France, which takes into account the average rates charged by banks over the last three months, increased by a third. There are as many wear rates as there are types of credits. Thus, for a loan of less than 10 years, the maximum legal rate of a mortgage will increase in January to 3.41% (against 3.03% currently), and that for a loan between 10 and 20 years will be set at 3 .53% (against 3.03%).
“The year 2022 was again a favorable year for real estate credit”, indicated the Banque de France, which noted a growth rate of real estate loans to households of 5.7% in the first estimate. In France, assures the institution, “rate conditions remained the most attractive and safest of the major countries in the euro zone”.
Protect borrowers
The rise in interest rates for new mortgages has been noticeable since the spring. The banks are passing on the tightening of the monetary policy of the European Central Bank (ECB), via an increase in its key rate, in order to fight inflation. But during its last increase on October 1, the Banque de France had deemed “neither desirable nor necessary an exceptional increase” in the ceiling rates, the role of which “is to protect borrowers”. Because raising the wear rate has the effect of making new mortgages more expensive for individuals.
The average interest rate on mortgages in France – all durations combined – stood at 2.25% in November. Either its highest level for at least seven years, according to the dashboard of the Crédit Logement / CSA observatory. In November 2021, the average interest rate was 1.06%.