Year 2012 ends with French mortgage rates at historic lows, mainly due to a fall in the 10 year government bond rate (TEC 10) and an offensive policy from banks in a difficult market. The beginning of the year recorded a sharp drop in demand but since September, in a context where borrowing has never been so inexpensive, demand has increased again thanks, in part, to an increase in borrowers re-mortgaging.
Fixed rate mortgage rates decreased by 0.76 points on average in year 2012
In December, 49% of banks have lowered their fixed rates whereas 51% have left them at the same level. No increase from any bank has been recorded. The average rate also decreased slightly to 3.55% over 20 years (against 3.58% in November and 4.31% in January). In 2012, rates have decreased on average by 0.50% to 0.85%. This is a historic decline that nobody expected in early 2012. One explanation can be found in dramatic decline in the TEC 10 index (the rate at which the French government can borrow for 10 years, which now stands at 1.99% in December. The other factor is that banks which declining demand are offering favourable discounts to attract customers,
This December, borrowing €200,000 over 20 years costs on average €80 less per month than in January. This leads to an overall savings of nearly €20,000 over the loan duration.
Where next for the market?
Since the beginning of the year, experts have observed a decline in demand (-20% of applications with signed sale agreement in Q1 year on year), mainly due to the change of Government and more generally to the economic conditions and high price context. Since September, thanks to a windfall linked to interest rates, mortgage application volumes have shot up to regain the 2011 levels, though 25% of applications are now for a re-mortgage.
In October, the Banque de France recorded a rebound of 21% over a month in the number of completed French mortgages, but reported a 34% drop in total over 12 months. In the current economic context, borrowers rely on brokers for advice, support and expertise. Existing borrowers also ask them to renegotiate their mortgage and take advantage of historic low French mortgage rates.