Mortgage rates, which had been declining for fourteen months, are now on the rise as banks adjust their rates in response to increasing government borrowing costs. In April, average rates for 20-year and 25-year mortgages reached 3.20% and 3.40%, respectively. While some banks remain competitive, borrowers are encouraged to explore renegotiation options, especially if their current rates exceed 4%. Despite the upward trend, opportunities for favorable deals still exist, particularly for first-time buyers benefiting from new loan programs.
Shifting Trends in Mortgage Rates: What’s Happening?
For the past fourteen months, homebuyers have enjoyed a steady decline in mortgage rates. However, as April unfolds, this trend appears to be reversing, with rates quietly on the rise. According to the broker Vousfinancer, over half of the banks have adjusted their rate structures upward. This shift could significantly impact borrowers, although the increases are currently modest.
In March, several institutions were still offering loans at an attractive 2.99%. Fast forward to April, and the average rate has escalated to 3.20% for a 20-year mortgage and 3.40% for a 25-year mortgage. The driving force behind this increase? A rise in the 10-year government borrowing rate, fueled by ongoing geopolitical tensions and the substantial financing demands of European nations. This situation prompts an important question: Are we witnessing the dawn of a new era for mortgage financing, or is this merely a fleeting setback?
The Reasons Behind April’s Increase in Mortgage Rates
The global economic landscape has been turbulent in recent weeks. A noteworthy meeting between key political figures at the end of February triggered immediate fluctuations in financial markets. This resulted in a notable rise in indicators such as the 7-year Midswap and a significant increase in the 10-year OATs, the French government bonds that have a direct impact on mortgage rates.
Julie Bachet, the managing director at Vousfinancer, states, “A portion of the banks has clearly passed on the increase in the 10-year state borrowing rate, which reached 3.50% in March.” Since many banks source their funding from the markets, they are compelled to adjust their rates to avoid losses.
The data illustrates the current landscape:
- For 15-year loans, the best rates are between 2.92% and 3.04%
- Over 20 years, rates range from 2.99% to 3.20%
- For 25-year loans, some banks offer rates near 3.40%
Société Générale, which previously provided a competitive rate of 2.99% across all durations in March, has now revised its offerings, displaying rates between 3.20% and 3.50% for 20-year loans. This rapid change may cause concern among potential borrowers.
Despite these changes, banks remain open for lending, focusing on attracting desirable profiles. This competitive atmosphere creates notable disparities in rates depending on individual circumstances.
As Pierre Chapon, president of Pretto, notes, “Some banks are still keen on acquiring new clients, leading to significant differences between profiles and institutions.” For instance, a couple earning €110,000 annually with a contribution of €345,000 successfully secured a rate of 2.79% over 25 years. This translates to a savings of €18,000 in interest compared to a standard rate of 3.04%. Notably, first-time buyers are benefiting from the expanded zero-interest loan (PTZ) program, which has been available since April 1 for new individual homes across the country.
Although rates are on the rise, there remains room for maneuvering. Historically, rates have been moderate, having surpassed 4% in late 2023 before retreating due to easing market conditions. If circumstances improve, we could see a potential decrease in rates in the upcoming weeks.
For those who secured loans at the peak, now might be the ideal time to renegotiate. If you have a loan at 4% or more for an amount over €250,000, it may be worthwhile to consider renegotiation, especially if the current rates are more than 0.7 points lower. There are no legal barriers preventing you from starting this process at any time.
In summary, while there may be a slight shift in trends, it’s not time to panic. The key to navigating this evolving landscape lies in actively comparing options and negotiating terms. Banks still have flexibility in adjusting their rates based on individual profiles and projects, leaving savvy borrowers in a strong position to secure favorable deals.