Since the summer of 2016, month after month, mortgage rates have been described as historically low. The decline slowed in December. Numerous indices show that we are moving towards a rise in rates in 2017. Until can they go up?
Real Estate Loan: Forecast for 2017
Towards a rise in mortgage interest rates in 2017
In December, rates are up from 0.10 on average. The average 20-year rate 1.60 (gross rates excluding insurance, guarantees and fees) against 1.50 in November and 1.70 in September.
Several parameters show an upward trend in rates for the coming months:
- The evolution of OATs (Assimilable 10-year Treasury Bonds). The rate of OATs, which serves as a benchmark for setting mortgage rates, is rising again after almost uninterrupted declines since January. If this trend is confirmed, banks will raise their rates.
- The return of inflation. The Bank of France announces an inflation of 1.10% for 2017 and 1.4% for 2018 against 0.50% in 2016. The rise in the price of oil, after the sharp drops of 2015, largely explains this return of inflation. A stronger rise in crude prices in the coming months would accelerate this trend.
- The situation of French banks. If exceptionally low rates make the happiness of the borrowers, they weaken the banks which see their margins erode little by little. At some point, they will have to raise their rates.
How far can mortgage rates go back in 2017?
This beginning of the year should see a stabilization of credit rates then a gradual increase (about 1%) to adapt to the fluctuations of the economy.
Currently (ECB) European Central Bank always lends to banks at very low rates. But it will have to adapt its monetary policy according to what will happen at the national and world economic level.
For their part, the banks have an interest in maintaining a low rate commercial policy to win new customers, competition being tough.
In this very beginning of 2017, nothing therefore suggests a sudden and significant rise in credit rates that could penalize the real estate market as a whole.
The rate of wear (maximum interest rate that can be applied by a financial institution) applicable on January 1 and published each year by the Ministry of Economy and Finance is still far from being reached.
It should be noted that for the first time, this rate varies according to the duration of the credit: 3.40% for a fixed rate mortgage of less than 10 years, 3.35% for a credit of 10 to 20 years and 3.37% above 20 years. It is fixed at 2.83% for variable rates. In the third quarter of 2016, the maximum rate of real estate loans was 3.61%.
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