Unlike April, when the slight increase in rates concerned only a few institutions, most lenders have raised their interest rates in May, as brokers have indicated. How can we understand this phenomenon, and should we be concerned?
Slightly higher rates and longer loan terms
According to figures from the CSA/Crédit Logement Observatory, in April the average gross interest rate was 1.07%, the lowest ever.
At the same time, loan terms lengthened, reaching an average of 230 months in April , compared with 227 in January. Another historic figure: the majority of mortgages - 55.7% to be precise - granted in April were for terms of between 20 and 25 years, compared with just 46% in 2019.
At La Centrale de Financement, the average monthly rise in rates in May was 0.04%. In early May, for a 15-year mortgage, the average rate was 0.82%, and the best rate 0.56%. For a 20-year loan, the average rate is 1.05%, and the best rate 0.76%, rising to 1.28% and 0.98% respectively for a 25-year loan.
Why have rates risen so slowly?
Does this signal the end of low rates? According to the brokers, there's really no cause for alarm. Firstly, because on closer inspection, only the worst applications are affected by this increase, while profiles considered the best by the banks are protected from this slight rise in rates.
Secondly, because this increase is primarily due to a strategy adopted by the banks to slow down the flow of applications. As a result of confinement and vacation postponements, more bank staff were absent or telecommuting in their entirety, reducing the pace at which mortgage applications were processed.
To save time and absorb the workload, which is all the greater as demand for credit has exploded, banks have raised their rates. The average processing time is now 60 to 75 days.
While the slight rise in rates can also be explained by a gradual reduction in economic risks, and by better results from the banks, we'll have to wait a few months to see whether this slight increase will last over time and become a real trend.