Will there be an increase in mortgage rates over the forthcoming months?
Mortgage Interest Rates in Île-de-France See Slight Increase Amidst ECB Policy Changes
Mortgage interest rates in Île-de-France have shown a gradual increase over the past year, reflecting the European Central Bank's (ECB) monetary policy changes. This trend has made home buying more challenging for first-time buyers like Clément Choussy, a teacher who recently signed to buy a new home in the region.
Since April, there has been a slight upward trend in interest rates. In the case of Clément, his new loan offers a rate of 3.19% over 25 years, which is higher than his first purchase rate in 2020. For the school year 2022-2023, mortgage rates in Île-de-France have risen to around 2% or slightly higher.
However, the ECB's communication indicates a likelihood of pausing or reducing the pace of rate increases as inflation moderates. Market expectations point towards a gradual reduction of ECB key interest rates by 25 basis points in April 2023 and after, a move that could eventually moderate mortgage rates.
Estelle Rousseau, a broker and manager at the Empruntis agency, states that current rates are in the lower average of what has been seen in the last 20 years. Despite the high interest rate, Clément Choussy believes it's better than what could potentially happen in the future.
Meanwhile, a major construction site is ongoing in Île-de-France, with several hundred homes to be built. The exact timeframe for the completion of these homes is not provided.
Clément Choussy expressed concerns that the interest rate could be higher in a few months. He asked his broker to secure the lowest possible rate as soon as possible. Despite finding the interest rate high, he signed to buy one of these homes on August 7.
The increase in interest rates could affect the housing market, which had regained momentum with more than 2.5% of transactions in one year. However, the overall trend during the 2022-2023 school year combined an initial phase of rising mortgage interest rates, followed by a stabilization or potential slow decrease aligned with ECB’s easing scenario.
House price indices and mortgage debt data for this period show that affordability became more challenging due to increased rates but remained influenced heavily by local market dynamics in Île-de-France compared to other regions. The location of the construction site is not specified.
In conclusion, mortgage interest rates in Île-de-France for 2022-2023 generally increased in line with ECB rate hikes but began to stabilize with expectations of gradual rate cuts leveraged by disinflation trends late in the period.
French real-estate investors, like Clément Choussy, are experiencing a rise in mortgage interest rates amidst changes in the European Central Bank's (ECB) monetary policy. Despite the increase, Choussy chose to invest in a new home, securing a rate of 3.19% over 25 years and expressing concerns about potential future increases. The ongoing rise in interest rates could impact the French housing market, making personal-finance decisions for home buying more crucial.
