French mortgages: almost all banks have raised their rates

Over the last two months some thirty banks have increased their rates, sometimes by up to 0.4%. But the demand for French mortgages remains strong.

The almost uninterrupted decline of French mortgage rates over the last three years is! In June, lending rates on resale properties increased slightly from 0.2% to 2.02% on average (excluding insurance), says the Observatory Crédit Logement / CSA. In real terms for non-resident buyers this takes your typical French mortgage rate across 20 years back up to 2.7%, up 0.15% from the all time low of 2.55% recorded in May this year.

Since May, more than thirty banks, either national or regional, have now increased their rates (in some cases twice). The increases range from 0.05% to 0.40% depending on the institution and as always the final rate depends entirely on the client.

The rises follow the pattern of French government 10-year bonds, which have increased from 0.37% in mid-April to just above 1%. Depending on what happens in the Eurozone, real estate lending rates should continue to rise gradually. Crédit Foncier expects 750,000 transactions over 2015, instead of 691,000 in 2014, with prices down 2.5% (for the whole of 2015).

Credit demand remains strong

For now, the slight rise in interest rates has not discouraged international or domestic buyers. The announcement of the first rate rise definitely injected some urgency into the market and has come at a time where historically, as we enter summer, the market can be much quieter. This will be another welcome boost for those in the industry.

Processing times are getting longer as a result and some banks are being more selective with applicants. Yet it’s not just new buyers, which are flooding the market. Those looking to renegotiate are also adding to the bottleneck. Many current domestic and non-resident owners have been watching and waiting for the right time to strike.

The number of renegotiated home loans jumped 48.1% in the second quarter of 2015 compared to the same period of 2014, according to Crédit Logement.