Faced with soaring price increases, the European Central Bank released heavy artillery on Thursday with a substantial rise in its rates. A decision that will have positive and negative consequences for your wallet. Explanations.
The European Central Bank has decided to strike hard. As prices soar with a leap of 9.1% in August over one year in the euro zone, unheard of since the creation of the single currency, it announced on Thursday a sharp increase, of three quarters of a point, in its reference rates. Currently ranging from 0% to 0.75%, key rates will henceforth be between 0.75% and 1.50%. A decision which comes two months after a first raise of half a point in more than ten years. The generous monetary policy which had made it possible to stimulate the economy is therefore well and truly over to contain inflation well above the rate of 2% term by the ECB. This second rate hike in a short time will have many consequences, positive and negative, for the household budget.
A boon for your savings
On the flip side, this decision by the ECB will improve the performance of several savings products. Starting with the euro life insurance funds which are made up of loans issued by the States. While the euro funds today are struggling to offer a return of 2% like the Livret A, this increase in return will however be slow to materialize. In fact, insurers’ stock of sovereign bonds is gradually renewed. Euro funds are tankers and therefore there is a strong inertiaexplains the economist Philippe Crevel.
Other rate products that will benefit from the ECB rate hike: savings books. Starting with the Livret A and its cousin the Livret de Développement Durable et Solidaire (LDDS). They should see their remuneration increase once again from February 1, when it is next reviewed by the Banque de France. The Livret A rate is in fact calculated every 6 months from the arithmetic mean between inflation excluding tobacco during the previous semester, and the STRa reference rate for day-to-day loans between financial institutions.
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However, as the ECB boosts its rates, the banks will pass on this revision to theirs, automatically causing a jump in the STR. Thus, the Livret A and the LDDS, which saw their rate drop to 1% on February 1 and 2% on August 1, have every chance of becoming even more advantageous in 2023 and 3% from next February 1st.
For their part, taxed bank books should also benefit from this decision by the ECB. According to the latest data available from the Banque de France, as of July 1, their average yield is only 0.09% gross and only 0.063% net, after deduction of the single flat-rate deduction of 30% which applies to interest. But according to the latest statement from MoneyVox, carried out at the beginning of September, bank books have since seen their remuneration pass on average 0.12%. The banks that set the rate for their house savings accounts as they see fit have therefore begun to pass on the ECB rate hike initiated in July. And it should therefore continue even if the return on bank books remains anecdotal compare that of Booklet A for example.
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An impact on the future PEL rate
Indeed, the banks do not have much interest in pushing their remuneration since individuals always leave more 500 billion euros on current accounts. Money that they can partly use for their lending activity. According to INSEE, only 6.8% of households have a bank book, a product often used once their Livret A and their LDDS is at the ceiling. It should be noted that some specialized establishments offer boosted remuneration on their bank books with promotional offers of up to 3%.
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In addition, the rise in ECB rates will also have an impact on the remuneration of future Housing Savings Plans which will be revised in December, explains Philippe Crevel. Indeed, the calculation formula is based on the rates of the money and bond markets which will de facto increase. The rate for new PELs, currently fixed at 1% since August 1, 2016, should therefore almost double.
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The cold shower for real estate credit
Regarding loans, the ECB’s decision should have an impact on borrowers, although the banks have partly anticipated it. It will confirm the increase in mortgage rates seen in recent months. While some banks, in September, posted rates of 2.45% over 20 years, very close to the usury threshold [le taux maximal auquel une banque peut prter, NDLR] fixed rate of 2.57% until October 1, their leeway to raise rates further is limited. Finally for those who still grant credits. Several establishments no longer lend today because it is no longer profitableexplains Mal Bernier, the spokesperson for Meilleurtaux.
In the current context, with a 10-year OAT, an indicator of French State borrowing rates which strongly influences the evolution of the credit market, currently at 2.1%, mortgage loan rates should sail around 3% according to Mal Bernier: but it is impossible with the rate of wear. Result, many sales records are currently frozen while waiting for a possible modification of the method of calculation of the rate of wear on October 1st which would make it possible to pass more files.
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