Low rates and bank competition play for mortgage loansOn February 13, 2020 by admin
Low rates and banking competition encourage you to look into your real estate projects because the economic situation is definitely favorable for buying on credit!
Better, why not take advantage of a rental investment to review the conditions of a loan in progress? Between negotiation and renegotiation, it’s time to concretize your steps and call on a broker to put your file at the top of the pile!
A borrowing context clearly favorable to credits
Since June 2019, the yield on 10-year government bonds (Assimilable Treasury bonds – OAT) has been negative : in other words, France is paid to borrow.
At the individual level, commercial banks are pushed by the European Central Bank (ECB) to grant loans to French households – in particular mortgage loans. While this low-interest-rate environment does not encourage savings, it strongly encourages purchases of principal residences and rental investments – by opening up homeownership to a wider audience.
Better still, with interest rates below the level of inflation, for 15 consecutive months now, households (like the French State) also earn money by borrowing.
According to the President of the ECB, Mario Draghi, 10-year OATs should not increase before June 2020 . Consequently, the rates applied to mortgage loans should not increase either until next summer. Except for outside events on a French or European scale.
Rates below 1% over 20 years for 25% of French households
According to the Housing Credit Observatory / CSA, the average mortgage rate (excluding insurance) is 1.17% – 1.23% for new home buyers and 1.19% for new home buyers. former. In detail, the average rate is 0.96% over 15 years, 1.13% over 20 years and 1.34% over 25 years.
“This summer, mortgage rates were 5 times lower than in the early 2000s … and even 12 times lower than in the late 80s! “
Now more than half of households borrowing over 15 years get a rate below 1% when a quarter of them get it for loans over 20 years. A trend already observed in early summer 2019 and which only increased in July and August.
Increased Competition Helps Lower Rates
Today, faced with low rates, banks only have a mortgage to attract new customers: they start from the assumption that a customer who has benefited from a low rate will stay in their establishment longer because it should not be tempted to renegotiate it with a competitor.
But faced with this fierce competition, which encourages consumers to obtain several offers, the subscription periods become longer: when a bank responded between 7 to 10 days in normal times, its deadline can reach 21 to 60 days today!
However, beyond the stress generated by this wait, it can also create delays at the level of notaries in the processing of the acquisition project, or even lead to its cancellation in the face of an impatient seller.
To avoid these inconveniences, there are 2 options:
- Contact your banker before even starting your real estate prospecting
- Use a broker who has privileged access to banking establishments
At a time when negotiations are difficult, the fees of intermediaries can weigh in the balance. Except when it comes to a free broker, like Good Finance!