Mortgage Rates in France Near 3%: A Positive Shift

Discover how falling interest rates are boosting loan approvals in France. Explore the implications for homebuyers and the housing market.

Interest rates have been on a downward trajectory since the dawn of the year, and in a delightful twist, the number of loans being granted is on the rise. As we approach the end of summer, interest rates are continuing their descent, now trending towards a tantalizing 3% following a notable reduction in July. According to the latest figures from the Observatoire Crédit Logement CSA, published on August 1, average mortgage interest rates dipped to 3.62% across all loan periods in July, a slight decline from 3.66% the previous month. This marks a significant drop of nearly 0.6% since the year's inception, bringing us back to the levels seen in July 2023, when rates also averaged 3.62%.

When we delve into the specifics, loans with a maximum term of 25 years reveal that those for 15 years are now averaging 3.49%, while 25-year loans hover around 3.60%. The rates for 20-year loans have also seen a decrease, settling at an average of 3.50%. Mortgage broker Cafpi corroborates these findings, reporting average rates of 3.54% as of August 1, with the most competitive rate in July being an enticing 3.18% for a 20-year loan. For those seeking shorter terms, Cafpi has even indicated that rates below 3% are within reach for 10-year loans.

But what’s behind this intriguing drop in rates? The Observatoire suggests that the decline can be partially attributed to a seasonal dip in demand during the summer months. “It is customary in July, with the onset of summer holidays, for loan demand to wane,” the report states. “Banks typically hold off until September to adjust their rates downward, aiming to attract borrowers returning from their sun-soaked escapades.” However, this current low is not merely a byproduct of summer lethargy; the trend has been evident since the beginning of the year, following an average interest rate of 4.20% in December 2023. This phenomenon serves as “proof that, despite the summer lull, banks are still keen on acquiring new customers and maintaining their competitive edge.” It could also signal a potential resurgence in the market after a prolonged period of stagnation.

So, what implications do these new rates hold for prospective buyers? The declining rates have effectively bolstered buyers’ purchasing power. For instance, in Bordeaux, a 39m² property is now accessible for monthly repayments of €1,000 over 20 years—3.4m² more than what was available for the same amount in July 2023. Similarly, in Marseille, buyers can now secure 49m² for the same monthly payment, an increase of 3.3m² from July 2023. Strasbourg offers 46m² (up 3.7m²), while Nantes boasts a remarkable 50m² (up 7m²).

In a broader context, the number of loans granted nationwide has surged by an impressive 57.1% year-on-year for the period spanning May to July 2024, compared to the same timeframe in 2023, as reported by the CSA Observatoire. This surge in lending activity, coupled with falling interest rates, paints a promising picture for both buyers and the housing market at large.