Real Estate Rates Decline Confirmed: Impact on Buyers and Market Activity

Real estate rates: the decline is confirmed, but buyers are not following

Despite the drop in mortgage interest rates in March, the total number of new loans granted continues to decrease according to the Bank of France. In fact, in March, new housing loans, excluding renegotiations, reached their lowest level in almost ten years, at the level of 6.7 billion euros. While the average interest rate on these new loans became more favorable to borrowers for the second month in a row, falling to 3.94% after the peak in January.

Loan rates taken into account 05/08/2024

A significant reduction in the number of new housing loans

In March, the number of new housing loans, without renegotiationdown to 6.7 billion eurosthus marking its lowest level in almost ten years (6 billion euros in October 2014, still without renegotiation).

This figure represents a decrease compared to the previous month, where it was 7.4 billion euros. The number of loans granted is decreasing despite the recession loan rates. In fact, the average interest rate on these new loans continued to benefit borrowers, going from 4.11% in February to 3.94% in March, marking the second month of decline after the highest rate in January (4.17%), according to data from Bank of France.

Attractive interest rates, but buyers beware

The drop in rates should have boosted demand for mortgages, especially as banks have shown more interest in providing loans. However, this expected animation did not come, and potential buyers are not in a hurry to seize these opportunities.

The main obstacle remains: high cost of real estate, a view shared by all market participants. Despite a slight drop in rates, the financial burden of loans is still significant for households, which affects their purchasing power. Therefore, although lending conditions are improving, the real estate market continues to face challenges related to high property prices, preventing a stronger recovery in activity.

Illnesses in the financial sector

Several players in the real estate sector point to some rules established by the High Financial Stability Council (HCSF) which would hinder the dynamics of the marketespecially regarding the grant estate loansespecially for rental investment.

The bill, presented by Lionel Causse to relax the HCSF measures and which was to be debated on Monday 29 April, was withdrawn by its author, as the amendments adopted were evening turned the text that “doesn’t make any sense anymore and doesn’t. longer to have any reason” according to the MP.

The date of the next quarterly meeting of the HCSF, which in particular brings together the governor of the Bank of France, François Villeroy de Galhau, and the Minister of Economy, Bruno Le Maire, is still unknown. The first quarterly meeting, although not officially announced, was held through a “written procedure”, according to information provided by Bercy to AFP on Monday, confirming a statement from Les Échos. But, no decision was made at the end of this meeting.