Real estate credit: the fall in rates stopped by the surge in French debt?

Mortgage rates continue to fall at the start of the year. But for how long, while France’s borrowing rate is soaring?

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In this month of January 2025, the real estate loan rate continue to decline, for the 14th month in a row, to 3.30% on average for loans over 20 years. Enough to restore borrowing capacity to real estate buyers who had seen it melt like snow in the sun due to the quadrupling of rates between the start of 2022 and the end of 2023, against a backdrop of high inflation. But there exists “a downside, namely a somewhat nervous bond market”warns Ludovic Huzieux, co-founder and general manager of Artémis Courtage. The rate ofOAT (equivalent Treasury bond) at 10 years, at which international investors demand to be remunerated to lend to France over 10 years, is currently close to 3.5%, something never seen since the Eurozone crisis in 2011, compared to less than 2.9% before the appointment of François Bayrou to Matignon on December 13.

Certainly, the outbreak of fever on the French OAT is part of a general increase in borrowing rates in European countries, linked, in particular, to the fear of the resurgence of a inflation high under the effect of the protectionist measures envisaged by Donald Trump, who will return to the White House on January 20. But the gap between the borrowing rate of France and that of Germany, which currently stands at 85 basis points, compared to only 50 before the dissolution of the National Assembly on June 9, shows that the situation of France in particular worries investors. It must be said that the country, with its public finances in poor shape, is currently without a budget, the censorship of the Barnier government having interrupted the examination of the finance bill for 2025 by Parliament, which will only resume this Wednesday January 15. To which is added the threat of suspension of pension reformwith the cornerstone of a starting age of 64, demanded by the left so as not to censor the Bayrou government, while the pension system is already very deficit.

Rates at 3% in the first half rather than the first quarter

Gold “the 10-year OAT rate directly influences the setting of interest rates on real estate loans. When a bank grants a fixed-rate mortgage loan (which is the case for the vast majority of home loans in France), it uses the OAT rate to determine the loan rate. The rate of the real estate loan must be, in theory, higher than that of the OAT because there is added a risk premium (for non-repayment of the loan by the borrower) and the margin that the bank makes.recalls the Ifrap foundation (for research on administrations and public policies). So, “when the OAT rate increases by 1% the rates on new real estate loans increase by 1.4%”she calculates.

“I don’t see the banks implementing rate increases any time soon, but perhaps we should expect a pause in the fall in mortgage rates»nuance Ludovic Huzieux. Who therefore expects an average rate of real estate loans at 3% “during the first half of 2025, rather than from the first quarter, if the OAT soon rises to 3.50%”. “An average mortgage rate at only 3% in the first quarter, this can happen provided that the OAT does not continue to heat up”adds Maël Bernier, spokesperson for the broker Meilleurtaux. Ludovic Huzieux believes, however, that tensions on French debt will “to settle down” and discern “more favorable than unfavorable signals” for mortgage rates. If only because “banks have important business objectives” to complete at the start of the year, with this flagship product that is the real estate loan.