how much does your loan cost you based on your rate?

In two years, credit rates have increased from 1% to 4%. A situation which prevented many borrowers from accessing property. And for those who succeed, the bill turns out to be more and more expensive.

1% in January 2022, more than 4% in February 2024. For months, mortgage rates have inexorably increased in step with announcements from the European Central Bank (ECB), inflexible in its desire to ensure a return to the rate inflation to 2% by the third quarter of 2025.

While many candidates for property purchase have seen their project postponed until better days, due to lack of sufficient financial capacity, others still manage to borrow despite current rates. For the latter, the bill is steep. By borrowing today rather than two years ago, these are tens of thousands of euros added to the bill. Here are three examples to judge the impact of rate increases on your mortgage.

For a loan of 200,000 euros

Let’s take the example of a borrower who would take out a mortgage loan of 200,000 euros to buy their main residence. The latter is contracted over 20 years. In January 2022, the buyer could hope to borrow at a rate of 1.07%. Thus, in addition to his capital of 200,000 euros, he had to repay, on the entire loan, 22,251 euros in interest (excluding insurance and additional loan costs).

With the rapid rise in credit rates, the same borrower could, one year later in January 2023, obtain a loan at a rate of 2.47%. With this doubling, the amount of interest explodes. On the entire loan, in addition to its capital, the borrower now owes 53,652 euros in interest to the bank. And in February 2024, while credit rates are negotiated around 4.05% over 20 years, the sum of interest climbs to 92,136 euros.

For a loan of 300,000 euros

Now let’s take the example of a couple looking to borrow 300,000 euros to buy their property. For this sum, the household goes into debt with the bank over 25 years. In January 2022, it was possible to obtain your loan at a rate of 1.26%. As a result, the couple had to repay 49,882 euros in interest. One year later, in January 2023, bad news: the rate for the same credit rose to 2.75%. This is now 115,180 euros in interest that will have to be repaid to the bank. In February 2024, another cold shower: with rates at 4.16% over 25 years, the amount of interest to be reimbursed amounts to 183,041 euros.

For a loan of 400,000 euros

And inevitably, the greater the capital borrowed, the more the interest increases when mortgage rates rise. Finally, let’s imagine the same couple, who would seek to borrow 400,000 euros for their project, still over 25 years. In January 2022, with a rate of 1.26%, his loan required him to repay 66,510 euros in interest. One year later, at 2.75%, the amount of interest more than doubled, to 153,573 euros. Finally, in February 2024, the couple’s loan obtained at a rate of 4.16% will require them to repay 244,052 euros by the end of the loan.

However, these figures remain theoretical. For three months, real estate loan rates have in fact started to decline which various specialists in the sector estimate to be more or less slow. The broker Cafpi, for example, expects rates around 3% by the end of 2024, when other brokers like Meilleurtaux are more cautious and are betting on rates of 3.5%. In any case, borrowers with a loan at 4% today will always be able to renegotiate their credit in the coming months, once the rates return to around 3%, therefore reducing the cost of the latter.

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