In the 4th quarter of 2023, the Crédit Logement/CSA observatory indicates that the average rate of real estate loans in the competitive sector stood at 4.20%. This level was reached following a remarkable increase that began in the spring of 2022, and since then, it has increased by 3.20% to equal, for the first time in December 2023, the rate recorded in 2009.
This is a first since 2009: never since that year has the average mortgage rate exceeded the 4% mark. In December 2023, it reached 4.2% again. After two years of constant progression, the average credit rate has returned to its spring 2009 level. The increase of 189 basis points over the year 2023, however, remains significantly lower than that of the usury rate, which is established at 306 basis points for loans over 20 years, according to data from a study by the CSA/Crédit Logement Observatory published on Thursday January 18, 2024. Over the whole of 2023, the average rate reached 3, 59%.
The source specifies, however, that “if the progression was rapid until October, + 18 basis points -bps- per month on average”the trend is currently towards a rather horizontal curve with “+9 bps in November and +2 bps in December”.
At the origin, inflation and the high rates of the ECB
As an explanation for this spectacular increase, reference is made to the high rates of the European Central Bank (ECB) which acted accordingly to equally high inflation. Encouraging banks to pass this increase on to their customers, at the risk of generating loss-making transactions.
“ For the first time since July 2022, the ECB’s main refinancing rate remained stable, and the average rate of return on household deposits increased only slightly. The profitability of the new credits granted was able to increase and allow banks to “margin” without having to quickly increase the rates of credits granted: especially since with the transformation of clienteles and markets, the duration of credits is slowly decreasing”noted Housing Credit.
Prospect of stability in real estate loan rates before a decline to 3.30% in 2025
However, the number of loans granted continued to decline during this period. In December 2023, the average duration of loans granted was 248 months, or 20 years and 8 months, “a level rarely observed in the past (13.6 years in 2001 and 17.1 years in 2014)”, according to the study. Although this duration has remained almost stable since last spring, it is no longer enough to cushion the rate increases in 2023, leading to a 16.7% drop in household borrowing capacity.
For the year 2024, Housing Credit envisages a stabilization of the real estate loan rate, with an average annual level hovering around 3.60%, compared to 3.59% in 2023. A downward trend should follow at a relatively regular pace, reaching 3.30% in 2025.