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Rates

Real estate: borrowing rates at record lows

Published on June 04, 2021 - 3 mins reading time
Bank watch
According to monthly data from Observatoire Crédit Logement CSA, the average rate for a home loan held steady at 1.07% in May 2021, exactly the same as in April. This is the lowest average interest rate ever observed.

Borrowing rates fall

As detailed in the Observatoire Crédit Logement CSA's monthly scorecard, the average rate for a mortgage in May remained unchanged from April at 1.07%, reaching an all-time low. In detail, this rate is 1.12% for the purchase of a new property, and 1.07% for the purchase of an existing property.

Since December 2020, the average borrowing rate has fallen by 9 basis points. This represents a year-on-year drop of 18 basis points.

"Despite the prevailing uncertainty, the upturn in inflation, the hesitant recovery in the 1st quarter (with GDP down slightly and household purchasing power falling) and the rising risk of default by some borrowers, banks are continuing to improve the terms and conditions of loans granted, in order to support demand for home loans from individuals", the report details.

Across all loan terms, rates have fallen since the start of 2021. Loans with a 25-year term have lost 17 basis points, and loans with a 15-20-year term have lost 12 basis points.

Home loan terms are getting longer

The average mortgage term has been rising steadily since the start of summer 2020. This offsets the rise in property prices, and in most cases enables households to keep their borrowing costs below 35%.

Since autumn 2020, the average loan term has reached its highest level ever. As of May 2021, the average loan duration is 236 months.

The maximum loan-to-value ratio of 35% set by the Haut Conseil de Stabilité Financière (HCSF - French High Council for Financial Stability) at the end of 2020 has therefore contributed to a lengthening of the average loan term, as well as changes in loan distribution. Loans with terms of between 20 and 25 years now account for 56.3% of production, the highest level ever achieved.

At the same time, the level of personal contributions has risen very rapidly since the start of the year, by 11.5% between January and May, following an increase of 10.4% over the whole of 2020. This increase is due to the HCSF recommendations issued at the end of 2019 and renewed, with some modifications, at the end of 2020.

Finally, figures from the Observatoire Crédit Logement CSA show an increase in real estate market activity since March. It rose by 10% in March and a further 10% in April, before dropping by 10% in May due to the many public holidays.