The rise in real estate loan rates, which are at their highest level since 2009, is largely linked to the ECB’s rate hikes, which are intended to fight inflation.
The average rate on real estate loans reached 4.20% in the fourth quarter of 2023, the highest since 2009, while the number of approved loans continued to decline, according to calculations published Thursday by the CSA/Credit Lodging Observatory. Throughout 2023, the average rate reached 3.59% according to the same source. Although it is slowing, the average rate increase on real estate loans has been noticeable since spring 2022, when it was still barely above 1%.
Rate hikes by the European Central Bank (ECB) to curb inflation raised the cost of money for banks, which passed it on to their customers to maintain their margins. The monthly figures released by Credit Logement differed from the Banque de France figures, which were 4.24% and 4.11% respectively in December.
Central bank statistics tend to cover the entire market, unlike credit lags, the result of restatements based on partial data. These rates are enough to discourage candidates from buying a home, especially since some banks have given less credit and prices haven’t fallen quickly enough. In the fourth quarter of 2023, the average duration of loans disbursed was 248 months or 20 years and 8 months, “A level rarely seen in the past» According to the Observatory, which recalls that it was 13.6 years in 2001 and 17.1 years in 2014.
A “slow” reduction in rates
During the autumn, stability in ECB rates and a slight increase in the cost of savings resources significantly improved bank profitability. Credit market activity benefited: but the impact was less than expected due to deterioration in demand solvency due to increase in credit rates, it observed. In 2023, credit output – the amount of credit – fell by 41.7%. The number of loans declined by 39.5% during the year.
The decline slowed in the fourth quarter, to -30.6% and -19.5%, respectively. Property loan rates to come downslow down», according to the observatory which predicts “A declining trend, at a relatively regular pace throughout the year» 2024, from 4.20% in the first quarter to 3.25% in the fourth (with an average rate of 3.60% over the year). “Then the reduction in rates will continue in 2025», at an average of 3.10%.
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