Rates are falling again in March, a habit that brings the cost of home equity closer to historically low levels.
Always a good business to borrow at the beginning of the year
Interest rates, which pay a lender in exchange for a financing agreement, fall again in March to the delight of households who want to buy a property. Indeed, the average rate during this month of March falls to 1.39% against 1.44% in February, a decrease of 0.10% over one year, according to the study conducted by the Housing Credit Observatory THAT’S IT. It is also the lowest rate for a home loan since the historical threshold reached in 2016 with an average interest of 1.33%, regardless of the term of the loan. Good profiles have everything to gain by considering starting an acquisition project in this period.
In addition, is the population still able to borrow at negative real rates? It should be remembered that the year 2018 was particularly generous on this subject given a very noticed return of inflation measured at 1.8% according to INSEE. In concrete terms, this meant that household incomes increased beyond the cost of credit, since wages often rose faster than inflation, and some profiles could then borrow at theoretically negative rates. At the beginning of 2019, this situation is not really tangible for the majority of borrowers because inflation has fallen back to much lower levels. With an indicator valued at 1.1% in March 2019 over one year, real rates have thus returned to a positive level.
A cost of credit that rises as a result of longer loans and lower inflows
In addition, the cost of credit continues to grow since a real estate loan represented 4.27 years of revenue in Q1 2019 compared to 4.1 years a year earlier. A finding explained at first by a relaxation of the conditions of eligibility to obtain a mortgage loan agreement from a bank. They accept files with lower contributions, in order to attract first-time buyers, those young people who make the purchase of their first home, but also to extend the repayment periods which have the effect of increasing the overall cost operations. Conversely, the best profiles benefit from a much lower cost with the best rates.
Finally, a few years ago, lenders were still reluctant to grant mortgages over 25 or even 30 years. The decision to generalize longer loans is consistent with the willingness of banking institutions to open to a low-income clientele, but also to solve the price increase in the old market. Unsurprisingly, the Observatory said real estate loans are 29 months longer since the beginning of 2014, averaging 230 months in March.