In front of an advertisement for a mortgage. - LIONEL BONAVENTURE / AFP
The average mortgage rate increased sharply in France in May, as banks tightened their conditions in the face of the coronavirus economic crisis, the benchmark monthly study showed on Wednesday. Last month, mortgage rates granted by the competitive sector averaged 1.25%, details in a press release the Credit Housing / CSA observatory, which associates the main French banks with a research institute market.
This is a clear increase compared to May (1.18%) and, more broadly, after months of evolution at a historic low, affected at the end of last year at 1.12%. The jump is a "response to the rise in risks and uncertainty over future macroeconomic and financial developments," said the observatory in a press release. In other words, the banks are taking less risk at the time of a probably historic economic crisis, the government now counting on a recession of 11% this year.
Concern for low-income households
Several credit brokers, as well as notaries, have already worried in recent weeks that the attitude of the banks will harden. They see it as a risk for the activity of the real estate market and the purchasing capacities of the less fortunate households, especially as the prices do not stop their rise. Admittedly, "the rise in loan rates and the continued rise in housing prices were (...) partially offset by the lengthening of terms," notes the observatory.
The average duration of home loans stood at 230 months in May, just over 19 years, and continues to register at historic levels. All of these figures must be put into perspective by the fact that they come from a very reduced level of activity following the crisis and the containment measures decreed in the face of the coronavirus. Even though the containment was lifted on May 11, the number of new home loans fell by about 40% for the entire month compared to a year earlier.
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