France’s lending rate at 2.99% is transforming the borrowing landscape, offering long-term financing options for 15 and 20 years. Discover how banks are innovating to meet the needs of borrowers in this competitive market.
In the ever-evolving landscape of financial services, some banks have recently opted to raise their lending rates. However, the overarching desire to lend remains robust, prompting certain institutions to innovate with promotional offers aimed at attracting prime borrowers. As we look ahead to 2025, the lending ambitions of banks are palpable.
While it is true that January witnessed a modest uptick in mortgage rates—a first in a year—these increases have been relatively contained, ranging from a mere 0.05% to 0.20%. Notably, these adjustments predominantly affect riskier borrower profiles. According to the broker Vousfinancement, February has seen a stabilization in rates across most banks, with some even opting to lower them further, with reductions reaching as much as -0.20%.
As of February, average lending rates have held steady at 3.10% for 15-year loans, 3.30% for 20-year loans, and 3.50% for 25-year loans. However, enticingly lower rates are available, with offerings at 2.7% for both 15 and 20-year terms, and 2.9% for 25-year loans. The recent slight easing in government bond rates, coupled with the European Central Bank’s rate cut last week, is expected to foster an attractive interest rate environment. Nevertheless, the forthcoming weeks will be crucial, as political stability and broader economic contexts remain uncertain, complicating rate forecasts.
An Unprecedented Rate Since Early 2023
In a bold move, one national bank has chosen not to be swayed by the prevailing uncertainty. It has introduced a remarkable offer for February: a fixed rate of 2.99% for any complete loan application submitted before February 28, applicable to loans of up to 500,000 euros, over a term of 11 to 20 years. This unprecedented rate, the lowest since the onset of 2023, underscores the bank’s commitment to re-entering the credit market with competitive offerings, aiming to support a diverse demographic of borrowers, irrespective of age or income levels.
In a parallel initiative, a regional bank has implemented a tiered rate structure based on the energy performance diagnosis (DPE) of the properties being financed. Properties classified as DPE A, B, C, or D are eligible for the maximum reduction of -0.20% on the credit rate, thereby incentivizing energy efficiency. Conversely, properties rated E, F, or G will see a reduction of 0.10%, with the potential for an additional subsidy of -0.10% if energy renovation work resulting in a two-letter improvement is completed within 40 months of acquisition.
Average Contributions on the Rise
While banks are eager to lend, it is evident that the most favorable terms are reserved for the most creditworthy profiles. A recent study by Meilleurtaux reveals a notable increase in average contributions in 2024. Nationally, the average contribution has surged from 48,144 euros to 63,421 euros, marking a substantial 24% increase. The median contribution has similarly risen from 19,975 euros to 30,000 euros, reflecting a 33% increase.
This trend is somewhat surprising; one might expect that the decline in interest rates, which has ostensibly restored borrowing capacity, would lead to a decrease in mobilized savings. Instead, it appears that the wealthier segments of the population are actively pursuing their projects, while others may be opting to bide their time. In Paris, the average deposit has reached an astonishing 220,235 euros, while the PACA region closely follows with an average contribution of 91,512 euros. In contrast, Bourgogne-Franche-Comté reports the lowest average deposit at 33,587 euros.
Interestingly, there has been a slight decline in the amounts borrowed in 2024 compared to 2023, despite the increase in average incomes. The duration of loans has remained relatively stable across the nation, averaging between 21.8 to 22.8 years, with a national average of 22 years and 3 months.
Affluence Among Buyers
The data indicates a trend towards greater affluence among buyers. Meilleurtaux has documented an increase in the average income of borrowers, particularly notable in regions such as PACA (5,832 euros in 2024 compared to 5,737 euros in 2023), Haut-de-France (4,141 euros vs. 4,076 euros), Normandy (4,212 euros vs. 4,011 euros), and Bourgogne-Franche-Comté (4,243 euros vs. 4,041 euros).
As the lending landscape continues to evolve, the interplay of interest rates, borrower profiles, and economic conditions will undoubtedly shape the future of borrowing in France. The innovative strategies employed by banks to attract borrowers reflect a keen awareness of market dynamics and a commitment to fostering financial accessibility.
