Mortgage rates continue to rise in early May, according to analyzes revealed by specialized brokers. However, the banks are obliged to contain this increase, under penalty of seeing too many files blocked by the rate of wear.
Increase real estate rates to succeed in generating a margin on credit, while avoiding tipping too many cases beyond the usury rate limit (2.40% for loans over 20 years and more until the 1st July). This is the delicate equation that banks must solve when setting mortgage rates that have been rising steadily since the beginning of the year.
The calculations are dangerous for the banks, and even more with the maintenance of the wear rate, which automatically excludes files which were still financeable a month ago. Between March and April 2022, files refused due to the scissor effect represented 25% of incoming requests, compared to less than 5% in 2021. At Pretto, we have decided to reduce our fees, or even eliminate them for the borrowers most affected by the rate of wear. Our banking partners can also do it, wants to believe Pierre Chapon, co-founder of Pretto, in a press release.
Pay attention to your projects
With inflation, boosted by the war in Ukraine, however, the banks have no choice but to revise the rates upwards, especially since the interest rate on French government loans (OAT) 10 years, an important indicator for banks, is now 1.49%. Banks are between a rock and a hard place, explains Ccile Roquelaure, director of studies at Empruntis. Today, their margin on real estate credit is zero, even negative. They therefore want to continue to apply this increase that they are also experiencing in terms of cost of credit, but they are blocked by the rate of wear.
The data collected by Empruntis at the beginning of May therefore shows an increase from 1.35% at the beginning of April to 1.5% today on average over 20 years. The increases are slight but continuous, explains Ccile Roquelaure. We’ve had a lot of movement over the past few weeks. There are real nervousness, including in banking establishmentswho now meet their rate committees several times a month, confirms Mal Bernier, spokesperson for Meilleurtaux.
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According to Pretto, the average rate for a loan over 25 years has gone from 1.58% to 1.59%, while the average rate over 15 years remains stable at 1.34%. On the other hand, the rate over 20 years goes from 1.44% to 1.49%.
Average rates in banks at the beginning of May
- On 15 years old: 1.40% on average according to Borrowings; 1.37% for Better Rates; 1.34% according to Pretto.
- On 20 years: 1.50% from Loans; 1.47% for Better Rates; 1.49% according to Pretto.
- On 25 years: 1.65% according to Loans; 1.63% for Meilleurtaux; 1.59% according to Pretto.
Average rates noted by the brokerage networks, based on the scales provided by the banks. They do not take into account the cost of borrower insurance.
Even for the best profiles, the conditions are getting tougher. While the latter could still hope to find rates below 1% last month, this almost no longer exists, notes Pretto again. For the best profiles, the rates offered are 1.15% over 15 years, 1.26% over 20 years and 1.37% over 25 years.
For people who are currently in a real estate project, it is necessary take a little leeway, advises Mal Bernier. What is indicated at a given time is not an absolute rule. If you have been told 1.5% over 20 years, this does not mean that you will be able to borrow as much as expected within two months, because the rate may then be 1.70%.
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