“Very good news for French people who have real estate projects”, greets a specialist

The ECB’s announcement should lead to a further reduction in credit rates. On the other hand, returning to rates of 1% is “almost impossible”. Sandrine Allonier, analyst specializing in real estate, explains why.

For the French people “who have real estate projects, this is very good news“, greeted Sandrine Allonier, an analyst specializing in real estate, on Friday June 7 on franceinfo, while the European Central Bank announced for the first time in five years a reduction in its key rates.

The ECB announced a rebound in real estate loan volumes to around 9 billion. The drop in key rates “could accelerate this movement of reduction in credit rates” started several months ago, explains Sandrine Allonier. “At the end of the year, we could go back to 3%”, says the analyst. But the real estate market still remains seized up, due to a lack of properties and prices that are still too high: “Sellers need to lower their prices since we have prices that are still far too high compared to the borrowing capacity of the French,” she says.

franceinfo: What will the reduction in key rates for individuals actually change?

Sandrine Allonier: That’s very good news. This means that the banks themselves will be able to borrow the money they will lend cheaper. They will also be paid less for the money they will place in the ECB. So that means that it will be more in their interest to lend it than to leave it in the institution. This will create more liquidity in the economy, but also money that will cost less. So for those who have real estate projects, this is indeed very good news.

When will mortgage rates drop?

The good news is that this has already caused credit rate cuts, since these ECB rate cuts have already been announced for several months. The banks, after having completely stopped in 2023, returned to the market in 2024. To do this, they had to successively lower their rates month after month to recapture borrowers. But the good news is that it could accelerate this movement of lowering credit rates.

“At the moment, we borrow on average at 3.70% over 20 years. But at the end of 2023, it was more than 4.5%. At the end of the year, we could go down to 3%.”

Sandrine Allonier, analyst specializing in real estate

at franceinfo

Can we still dream of rates of 1%?

It’s almost impossible. We had credit rates at 1% because we were post-Covid, with a “whatever it takes” policy. ECB rates were negative at the time. Today, they remain around 4%. Advantageous and reasonable credit rates are around 2.5 or 3%. But we don’t have any visibility yet. Christine Lagarde, who is the president of the ECB, remained very cautious, telling herself that there could still be a little inflation, that international conflicts could also have an impact. She would see rate cuts month after month. What is certain is that it will move towards a more accommodating policy, with rate cuts which will perhaps occur again by the end of the year and that we could have rates at 3 % rather in 2025.

“A drop in rates of 0.5%, for a couple who earns 4,200 euros per month in income, is 10,000 euros of borrowing capacity to regain.”

Sandrine Allonier

at franceinfo

At the moment, as there are fewer buyers, it is easier to negotiate property prices. It is not necessary to wait for credit rates to decline, it is still slow and gradual.

The ECB published encouraging figures with a rebound in real estate loan volumes, approaching 9 billion. Does this mean that the French are buying while rates remain high?

The 1% rate phase of 2021 is forgotten. Every year we have new first-time buyers arriving on the market, young people who are now on permanent contracts, who are tenants, but who want to become owners because quite simply, it is often more advantageous to buy than to rent. We also have forced purchases, people who divorce, people who have children who need to buy bigger. We still have a market that remains dynamic, but we are in a market of necessity. We buy for housing, we buy more specifically to speculate. And that’s why, even at 3.5% in the long term, they still remain advantageous rates. Today, one of the points of friction is that sellers must lower their prices since we have prices that are still far too high compared to borrowing capacity. of the French and this level of rates is really a balancing act.