Real estate rates, a new downward dynamic in sight?

According to figures from the latest report from the Housing Credit Observatory / CSA, in October 2024, average mortgage rates reached a level of 3.46% in the competitive market (excluding insurance and security costs). The rate for new property ownership is slightly lower, at 3.41%, while that for existing property is 3.49%. This decline in rates constitutes an important step in the current downward dynamic, which began at the end of 2023 and has allowed the market to regain vigor, despite a complex economic context.

Borrowing rates noted on 06/11/2024

A seasonal slowdown followed by a recovery

After a rapid fall in rates of 9 basis points (bps) on average between December 2023 and June 2024, rates stabilized during the summer, marking a usual break linked to the seasonal drop in demand. In June and July, the decline was limited to 2 bps per month.

However, a new phase of decline began in September, with a drop of 8 bps on average over the months of September and October. This decline takes place in a context where housing purchase intentions show an improvement, supported by a downward revision of banking scales.

At the same time, the European Central Bank (ECB) reduced its main refinancing rate to 3.40% in October. This change, combined with a drop in wear rates, made it possible to relieve the cost of borrowing for individuals and stimulate demand in the real estate market.

Source: Housing Credit Observatory / CSA – Monthly dashboard – October 2024

The duration of loans, support for borrowers

To accompany this drop in rates, banks have extended the duration of real estate loans. In October 2024, the average duration of a home loan is 247 monthsor around 20 and a half years, with an average of 267 months for new property ownership and 256 months for old property.

This extension of durations facilitates households' access to more affordable financing despite the increase in the cost of goods. In this same month, 68.4% of real estate loans were granted for a duration greater than 20 yearsa proportion up from 65.1% observed in 2023.

However, although these lighter credit conditions are beneficial, the study highlights that they are not enough to fully revive the real estate market. Real estate prices remain high and demand is weakened by economic difficulties, thus limiting the effect of falling rates and increasing durations on household solvency.