Borrowers had their eyes glued to the announcements from the ECB which has decided to lower its rates. However, the impact for them should be limited. Explanations.
The European Central Bank (ECB) has started to lower interest rates this Thursday, June 6which were at their highest historical level, offering a breath of fresh air to households and businesses. She announced a drop in its three rates directors by 25 basis points, a first since September 2019.
This brings the refinancing rate from 4.5%, its historic high reached last September, to 4.25%.
This refi rate is the ECB’s main key rate (there are two others: the deposit rate and the marginal lending facility rate). This refi rate corresponds to the interest rate used when commercial banks borrow liquidity from the central bank for a period of one week. This subsequently guides the rates at which commercial banks then lend to their clients, particularly for property loans.
Will this affect French property loan rates? Not sure, answers the broker Vousfinancer. The impact for borrowers should be limited
As a reminder, the average rates (all durations combined) increased from 4.21%, the ceiling reached in November and December 2023 to 4.12% from January 2024, then 3.98% in February, 3.89% in March, 3, 82% in April and finally 3.73% in May, according to data from the Crédit Logement Observatory / CSA.
At the broker Vousfinancer, in May, it is possible to borrow at 3.65% over 15 years, 3.85% over 20 years and 4% over 25 years, but the lowest negotiated rates reach 3.4% over 15 years, 3.5% over 20 years and 3.8% over 25 years.
Downgrade of France’s rating
The other reason for this limited expected impact for borrowers is the downgrading of France’s rating by S&P. “This is bad news, without being extremely serious, but which could somewhat counterbalance the positive effect on the markets that the ECB’s rate cut could have, even if this deterioration was also anticipated,” analyzes Julie Bachet . However, the immediate impact of this deterioration should not be exaggerated. as we recalled here.
This has not pushed up the rate at which French debt is traded on the markets (mainly 10-year OATs), which has even fallen since this decision. On the other hand, this demonstrates a negative trend on French debt, and by extension on the entire bond market (debts to companies and individuals).
If the reduction in the ECB’s key rate is therefore unlikely to cause real estate rates to fall, this does not prevent them from being on a downward trend for the moment. “As proof, for June, most banks are lowering their credit rates again, from 0.10 to 0.30 points in the new scales received, including from national banks,” the broker reveals.
Moreover, in a context of more limited recovery than expected since the start of the year, banks are maintaining attractive commercial policies to attract new customers and achieve their objectives “while maintaining suitable margins, which will give them the latitude to lower their rates further in the coming weeks, especially if the ECB lowers its rates several times.