Changes in real estate rates: what you need to understand
You can't get away from it. Using credit is an essential step in financing your real estate investment. However, the news seems unpromising when it comes to obtaining real estate loans. It is not always easy to find your way around all the information that is sent to us. Rates of usury, increase in interest rates, tightening of access conditions... what are the criteria for borrowing nowadays? What is the impact of all these changes on your real estate project? Finally, is it a good time to get started? This article answers all these questions and reveals the evolution of real estate rates.
How does the mortgage interest rate work?
To properly analyze theEvolution of real estate credit rates, it is essential to understand how an interest rate works. An explanation is needed to identify a competitive rate and to understand the secrets behind the scenes of your financing request.
Before paying you the amount of your credit, your bank borrows itself from the European Central Bank (ECB). We are talking about the key rate. Your credit institution then adds its commercial margin and the cost of risk. It is a question of covering yourself against possible unpaid invoices. The nominal rate is then obtained. This is the interest rate that is offered to you excluding borrower insurance and other fees. Banks and the media report on this rate. As you will have understood, it depends largely on changes in key rates decided by the ECB.
What is the problem to know about the wear rate?
The usury rate is the maximum rate at which a bank is allowed to lend funds. This is a Global Effective Annual Rate (APR). This means that it includes the nominal rate, the cost of borrower insurance, and all expenses related to real estate financing, such as application fees.
The obstacles linked to the rate of wear in 2022
The usury rate is set each quarter by the Banque de France for the following quarter. In 2022, the increase in interest rates was sudden and faster than the change in the usury rate. This problem has led to numerous refusals of financing from banks. This situation has blocked multiple real estate projects.
Predictions concerning the rate of wear
Fortunately, the rate of wear and tear is expected to increase as early as the first quarter of 2023. It increases to 3.53% for a mortgage with a fixed rate over less than 20 years. It is therefore to be hoped that interest rates do not continue to rise as rapidly as in 2022. Let's analyze the trends together to properly anticipate this context.
The real estate rate trend
Before talking about the present, let's go back a bit. This approach is useful for identifying issues related to the evolution of mortgage rate.
The starting point for the general fall in interest rates
We are in 2008. Les interest rates have never been so high, around 5%. Then, the Subprime crisis led many states to an economic and financial fall. The ECB is taking unprecedented measures to relaunch growth and is lowering key rates. Since 2008, rates have continued to fall.
The new trends of rising mortgage rates
Les real estate credit rate had reached around 1.07% at the beginning of 2022. It was from that moment that they started to come up. The upward trend was confirmed throughout 2022. The average nominal rate in November 2022 was 2.25%, according to the Crédit Logement/CSA observatory.
The war in Ukraine, the surge in inflation and the energy crisis are the main causes of this situation. In response to these events, the ECB decided to increase its key rates. Following economic and monetary news is an effective way to anticipate Real estate credit rater coming soon. Let's see together what can be predicted.
Forecasts on the evolution of mortgage rates
The Higher Council of Notaries noted the decline in the real estate purchasing power of French people in 2022. What will happen in 2023? Let's decipher the trend.
2023: the right time for a real estate investment
The increase in the rate of usury, in force since January 2023, offers new hope to future buyers. It is a good time to launch a real estate project, not yet knowing what the rest of the year has in store for us. In addition, the first quarter is a favorable period for granting loans. Banks are relaunching their goals and their production. It is therefore a period of time during which they are more likely to negotiate their terms.
To this parameter is added the excitement of some sellers. Not all real estate transactions were able to take place in 2022, due to the general context surrounding real estate credit. So they are more open to negotiation, looking to finalize the sale of their house or apartment.
The evolution of real estate credit rates in 2023
Most brokers agree on a continued but moderate increase in 2023. However, it is still very interesting to take advantage of credit leverage for a real estate purchase. Interest rates are lower than inflation. They have not yet reached the level of 10 years ago.
The borrowing conditions set by the High Financial Stability Board (HCSF) remain unchanged. The maximum term of a mortgage is 25 years. The borrower's debt capacity must not exceed 35%. It seems essential to have a contribution to the file.
The evolution of real estate rates: in conclusion
Credit rates predict the weather to come on the real estate market. Nice weather or a rather gloomy environment? It seems that 2023 is off to a good start. The increase in the rate of usury boosts the real estate purchasing power of future buyers. Not knowing what changes the global and European economic context has in store for us, embarking on a real estate project Right now is most definitely the right time. Take advantage of still attractive rates and a market full of opportunities. Is that correct?
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