The prolonged decline of French mortgage rates has encouraged more and more French to become homeowners.
“Since the beginning of the year the market is accelerating, driven by improved credit conditions,” said the Observatoire Crédit Logemen. “In the first quarter of 2015 the number of loans granted by banks has suddenly jumped 23.7% compared to the same period of 2014. If you look at the period to April from 2014, the jump is even higher at +28.3%.
Until May of this year, each month real estate credit rates recorded new lows. In April, the French borrowed at a rate of 2.03% on average excluding insurance, according to the Observatory. Over 15 years the average interest rate taken by the French is 1.97% (excluding insurance), with 2.26% over 20 years and 2.63% over 25 years.
Yet the gap between the best mortgage rates offered to borrowers is still defined by the level of their personal contribution and therefore good income remains important. The range of rates goes from 1.71% and 2.26% for over 15 years, between 1.93% and 2.57% for over 20 years, and between 2.22% and 3.03% for mortgage products over 25 years.
More than half of borrowers choose 20-year terms
Overall, the amount of the personal contribution continued to drop in the first quarter of 2015 (-12.2% between January and April over a year), forcing households to borrow more. Of course, this is now readily possible since loan periods have continued to grow.
The average loan duration taken by a French applicant was 17.66 years. More than half of the loans granted we on terms longer than 20 years (54.2% against 43.7% in the first quarter 2014). Loans on terms longer than over 25 have also become more prevalent (18.8%), while those with durations of less than 15 years continue to fall (17.2% against 22.7% in first quarter 2014). These longer loan terms and low rates are finally benefitting young people and low-income households buying for the first time.