Who has not heard that rates will go up in 2018 following the cessation of the injection of liquidity by the Lite Lenders Bank? And yet, the observation is simple: the rates did not increase, nor stagnate, but still fell during 2018. Indeed, against all expectations, the mortgage rates did not rebound but beautiful and well down compared to 2017. As such, the average rate for all durations was 1.5% in 2017 against 1.43% in 2018 according to the Cream Credit study. At the same time, we observe that the rates moved downwards the first 6 months of the year and then remained stable during the last 6 months.
In addition, the average rate is below inflation, which increased in 2018 to 1.8%. The “very low rate” effect has contributed to the French turning more towards mortgage loans.
Debt: wealth creation
With the rise in inflation over the past 12 months, interest rates are currently negative. Indeed, by borrowing at a rate lower than inflation (1.8%), it is the borrower who is then remunerated, while the lender receives at maturity a sum lower than which he lent.
Mathematically, this means that you can increase your purchasing power by going into debt. Note that these credit rates are gross and do not include the rate of borrower insurance for example. This was made possible thanks to the campaign of the Lite Lenders Bank which wished to massively direct French households to credit.
Today, rates have reached their minimum in the face of an ever-increasing real estate market. Banks must use business strategies to continue to attract customers to credit.
Some info on credit in France
The balance sheet for 2018 is very satisfactory for financial institutions seeking to grant home loans. Indeed, at the end of December the total amount of borrowing outstanding in France exploded the records. 1,000 billion dollars: this is the total amount borrowed by all French people to date. This represents half of the French public debt which is equivalent to 2,300 billion dollars.
Another important point, the loan duration granted has never been so long. On average, 226 months, 10 more than last year. It should be noted that the banks have also considerably eased their conditions for granting loans concerning the capital contribution.
The era of accessible mortgage loans still has a bright future ahead of it. Professionals still expect to see rates rise slightly (between + 0.03% and + 0.1% for 2019). The amount of credit collection should probably run out in the coming months. It’s time to take advantage of these favorable conditions to invest! Contact our specialist advisers to obtain support from A to Z in developing your investment project!