Real estate credit: will political uncertainty cause a further rise in interest rates?

Do you have a short or medium term real estate purchase plan, and you fear that government censorship will cause interest rates to rise? Views on the issue differ.

Following the vote on the motion of censure on Wednesday December 4, concerns are increasing. The question of changes in mortgage interest rates is of particular concern to future borrowers. Financing and real estate professionals are nevertheless divided on the question. While some fear that the uncertain political climate will lead to a rise in rates, others remain optimistic about their future evolution.

The reaction of financial markets to the censorship feared by borrowers

On Wednesday, December 4, the motion of censure tabled by the New Popular Front convinced 331 deputies, and the government of Michel Barnier was forced to resign. Since then, questions about what happened next have multiplied. Borrowers, in particular, fear that interest rates will rise due to the current climate of political uncertainty. The financial markets could in fact react to government censorship by increasing the level of rates charged.

Maël Bernier, spokesperson for the broker Meilleurtaux, summarizes the situation: “How will the financial markets, that is to say those who lend money to the State but also to banks, react to this new institutional crisis When you lend, you like to know that your debtor is solvent and reliable. The fixed rate at which the French State borrows over 10 years, the 10-year OAT, could thus increase in the weeks and months to come.

For the moment, this 10-year OAT remains at a level close to 2.87%. If it were to increase, mortgage interest rates could also be impacted. This scenario, if it occurred, could lead to a resumption of the rise in real estate rates, after they had been falling for several months. During the month of December, banks continued to offer lower interest rates to future owners.

Interest rates which could continue to fall despite the political climate

For some professionals in the real estate sector, the rise in interest rates nevertheless remains uncertain. According to the broker Vousfinancer, the previous political crisis linked to the dissolution of the National Assembly in June did not lead to an increase in interest rates, and it is therefore possible that this situation will recur. The credit broker also insists on the fact that the rates defined by the financial markets are not the only elements to influence real estate rates.

Indeed, the interest rates on real estate loans depend on other factors, and in particular the key rates practiced by the European Central Bank (ECB). The broker Vousfinancer adds that “the commercial policy of banks also influences the level of credit rates”. However, they need to win over new customers, and therefore charge attractive interest rates to attract future owners.

Vousfinancer concludes its analysis by specifying that “for the month of December, [les banques] are still numerous to lower their rates, by 0.05 to 0.20 points, but also to extend the subsidized loans which were to end on 12/31/2024, thus demonstrating attractive commercial policies which could be harmed by an increase in rates credit”. Borrowers should therefore continue to be able to take advantage of this context to carry out their real estate purchase project at attractive rates.