The 3 reasons that explain the rise in interest rates

Rising prices are gaining ground, including real estate lending. While in 2021 it was possible to borrow at about 1% or less from some banks, the trend is now on the rise. That’s why interest rates are rising? LeLynx.fr reveals the 3 main explanations.

According to data from the CSA Housing Credit Observatory, the May was 1.38% interest rates in May. The rise is all the faster as in April, the rates were 1.28%. In just 3 months, interest rates are making progress 28 points.

He must know, however, that in 2021, these were exceptional: 1.06% on average . This is one of the reasons why borrowing rates are rising again.

The exceptional character of the year 2021

In 2021, they are close to 1.2 million real estate transactionswhich have been concluded, or close to 270 billion euros in real estate loans . This year has been a great year for industry professionals. The Covid pandemic has turned many lives upside down and revived the prospects of many French people. They want more space and financial institutions have included it.

What the banks have also noticed is that they no longer need to display competitive rates to attract borrowers as they present themselves to buy a home! Some banks have revised up their interest rates since the beginning of 2022.

The new regulations

In 2022, more news could affect the benefits of banking institutions. they High Financial Stability Board (HCSF) has established new rules of use:

  • The effort rate of the borrowers is limited 35%(this is the ratio of annual income to annual borrowing expenses);
  • The maximum repayment period is set 25 years (cu 2 years maximum deferred).

These new regulations, in force since 1er January 2022, will likely reduce the number of borrowers. Until then, some consumers had been in debt for more than 25 years.

to infra-annual terminationcould also hit banks hard. In fact, it is now possible to terminate your borrower’s insurance at any time! Until then, consumers had to participate in the anniversary date of their contract to change insurance. From the le 1er June 2022, you can terminate your contract for all new credit. For those in progress, we still have to wait until 1er September.

A blow to banking institutions that hold 88% of the borrower’s insurance market .

You don’t have to compare insurance contracts on a regular basis! The main purpose of this law is to bring competition. The government is saving between € 3,500 and € 4,000 for borrowers.

In short, banks are looking for reduces the impact of these measures on their margins by increasing their interest rates .

Inflation

inflation

IT’price increase is palpable at all levels. Electricity, gas, fuel, food… Consumer bills keep growing! In fact, les consumer prices rose by 5.2% year-on-year (INSEE data for May 2022).

This one inflationhas, recently, pushed there European Central Bank(BC) à revise its key rates upwards for the first time since 2011.

Indeed, the level of inflation has reached 8.1% in the euro area! Or, at the ECB maintains inflation at 2% to see directors’ rates to reduce uncontrolled price risks. To this end, the European institution has decided to raise its management fees. The aim is to decorate consumers to borrow, as well as businesses, and therefore to curb rising prices.

What is a policy rate?
This is the fixed interest rate by a financial institution for an area or country. Within the euro area, the European Central Bank determines three key rates. The one that has the biggest impact on consumers is the refinancing rate. From this rate, commercial banks, with which individuals take out real estate loans, set their interest rates.

Therefore, by increasing its key interest rates, the ECB’s decision will have an impact on the interest rates charged by financial institutions.

The spleen remains relatively low

Bonne noua for those who want to contract a price in the coming year: at The rise in interest rates will not be spectacular in terms of inflation!

According to experts, certain interest rates can reach 2% by the end of the year. Thus, you can get a rate of 1.5%, which remains relatively affordable.

One council of professionals in the sector: if you have a real estate favorite, don’t wait!

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