The rate hike continued in October in France, according to data from the Crédit Logement / CSA Observatory. At the same time, the production of new real estate mortgages recorded a further decline.
The average mortgage interest rate in France stood at 2.05% in October, a level at its highest in nearly seven years, according to the Crédit Logement / CSA Observatory dashboard released Thursday. We have to go back to February 2016 to see a comparable rate of 2.07%.
In detail, loan rates have all increased, regardless of their duration at the time of granting. They averaged 1.92% over 15 years, 2.06% over 20 years, and 2.17% over 25 years last month. These rates do not include the cost of insurance and ancillary costs, such as the fees of any broker.
This increase, linked to the increase in the reference rates of the European Central Bank (ECB), is however rapid. Last December, the average rate was almost double, at 1.06%.
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The average interest rate for new mortgages is also closely monitored by the Banque de France. Its latest “advanced estimate” for September showed an average rate of 1.72%, down from 1.10% in December 2021. Data for October will be released on Friday.
The Banque de France is at the forefront because it is responsible for calculating the maximum rate applied by the banks: the usury rate. From 1 October it was 3.05% for a loan of 20 years or more, all costs included. We remind you that the usury rate is the maximum legal rate at which an establishment can grant credit. It takes into account both the loan rate, but also the insurance and administrative costs. It is calculated quarterly by the Banque de France from the average of the effective rates applied in the previous three months, increased by one third. The next update of these rates will not be made until next January.
These maximum rates are being targeted by critics, particularly by brokers who see them as a barrier to accessing real estate credit. One of their unions even went as far as demonstrating on September 20 in front of the Banque de France headquarters in Paris to ask him to make a gesture.
The average duration of loans is also increasing, according to the Observatory, which associates the main French banking institutions with a market research institute. It exceeds the symbolic bar of 20 years (244 months), a level “never observed in the past”.
Loan production would pass its peak. “Despite a revaluation of the usury rate, credit production is unable to rebound”, notes the Observatory. Loan production “measured on a rolling annual basis fell by 10.7% at the end of October, (…) and the number of loans granted fell by 12.9%,” he says.
The number of loans granted in August and September 2022 had already decreased by 34.7% compared to these same 2 months last year. A larger drop than the start of the Covid-19 pandemic.