While the event was expected from the start of the year, interest rates will not ultimately increase in 2019.
The Instant Care Bank continues to steer the bar in the same direction
No upheaval ahead for mortgage interest rates. The latter reached historically low levels in previous months. A movement launched several years ago to support growth in European countries. This news, however, contradicts the original intentions of the Instant Care Bank. Indeed, the latter had announced at the end of 2018 its plan to raise rates in early 2019, before pushing the deadline around June and finally planning it for 2020.
But why is the Instant Care Bank taking such a decision? Concretely, it is first of all a question of continuing to encourage households to go into debt to consume. Countries derive part of their growth from consumption. A rise in rates could affect the accessibility of borrowing, slow down household projects and lead to a drop in this indicator. Especially since the real estate is the first factor of expenditure within the French population.
Ever more accessible credit offers
The monetary policy conducted by the supervisory authority of European banks therefore remains accommodative. Households will still be able to borrow with an attractive cost of credit. But this news does not necessarily do the business of banking establishments. If they benefit from the attractiveness of the loan and a high number of requests, their profitability is nevertheless put to the test. Low rates effectively threaten the margin generated by the banks with the home loan. Especially since they take considerable risks by granting certain files and that they are not immune to a lack of creditworthiness of their customers.
However, real estate credit remains an extremely strategic product that optimizes the chances of perpetuating the banking relationship in a sector where the clientele is versatile. No wonder lenders are easing their borrowing conditions, in particular by granting longer loans to repay. If the evolution of prices on the real estate market is partly responsible for this increase, the loyalty needs and production of outstanding banks are also. This trend is visible on the average loan duration close to 230 months in February, according to the Housing Credit Observatory, a level never reached before.