Real estate loans: rates still low

This year remains an optimal time for real estate purchases. This is because rates remain exceptionally low due to constant competition between banks to attract the best profiles of borrowers.

The Notaries of France have established that 965,000 transactions were made in real estate between February 2017 and February 2018, an increase of 10.9% on the previous year. These excellent figures were predominantly driven by low credit rates.

Rates that remain attractive

In its latest statistical analysis, the Crédit Logement observed that in March 2018, the average nominal rate (excluding mortgage insurance) was 1.49%. Conditions were almost identical to those in 2017 which likely encouraged candidates to purchase. “Traditionally, in the spring, a very active period in real estate transactions, banks lower their rates considerably o capture a client base of new buyers … This is how we are getting rates close to the historical records of 2016,” says Sandrine. Allonier, Director of Bank Relations of the broker Youfinancer.

A slow and gradual rise in interest rates by 2020

“The pace of inflation is unlikely to decline in the future: after 1.2% in 2017, it should be between 1.3/1.4% (banking scenarios) and 1.6% (Banque de France) in 2018, and should accelerate slightly further by 2020 (1.8% according to the Banque de France)”, says the Observatory. “Mortgage rates are expected to increase only moderately in 2018 and end the year between 1.65% and 1.70% at most” predicted Crédit Logement.

Longer loan terms

2017 was synonymous with rising property prices, especially in popular areas. Low rates helped to absorb this price increase by extending the duration of loans. In the first quarter of 2018, the duration of bank loans were 219 months on average, or 18.25 years, according to the Housing Credit Observatory. Over the 2014-2018 period, the duration of loans has increased by more than one year.

Market lull

For real estate professionals, the first quarter of 2018 demonstrated a stabilising of the market with transaction volumes much quieter than in 2017 and prices that remained stable. “While the volume of transactions jumped 14% last year at national level, growth at the beginning of the year is only 2% compared to the last quarter of 2017” says the Laforêt network.

The advantage of online offers

In this context, it is in the best interest of bidders to take advantage of the competition that banks are pursuing to find the most competitive offer, according to their profile. In this respect, online banks have advantages over traditional banking networks. Thus Boursorama Banque offers a 100% online offer from the application to the loan signature, with some of the lowest rates on the market. Another advantage of Boursorama Banque is that they do not charge any fees. As a mortgage is not only a rate but also a long-term relationship between the borrower and his bank, Boursorama Bank have chosen to favour flexibility. For instance, they do not require proof of a regular income into a bank account to apply for a mortgage, nor do they give penalties in case of early repayment.