is this possible in France?

2023-09-12 04:06:51

Margaux Fodéré / Photo credits: RICCARDO MILANI / HANS LUCAS / HANS LUCAS VIA AFP
06:06, September 12, 2023

This is unprecedented in more than 20 years: in the United States, rates for a 30-year home loan have passed the 7% mark. This is a direct consequence of inflation and the FED’s fierce fight against rising prices. In France too, rates are skyrocketing. This Thursday, the European Central Bank must announce whether it will continue to tighten its monetary policy. Across the Atlantic, the economic situation is very different. But real estate rates at 7% in France present a scenario which seems, today at least, improbable.

Firstly, the economic situation across the Atlantic is not the same as in Europe, as noted by Christian de Boissieu, vice-president of the Circle of Economists. “We have a European economy which overall is doing less well than the United States. The United States is at full employment, so inflationary pressures may appear, with salary increases. The context of both growth and employment, budgetary policies are not the same. This is the reason why American interest rates are higher than European rates”, analyzes the economist.

Rates of 5.5% possible

Furthermore, to In the United States, it is possible to borrow over 30 years, which is no longer the case with us. And as these credits are longer, they are riskier and therefore more expensive. This is another reason why real estate rates in France are lower than there. Rates of 5.5% remain possible, but they could well go beyond their current level, with 4% on average for a 20-year loan. Marc Touati, economist, does not neglect this scenario: “A scenario with interest rates on real estate debt over around twenty years at levels of 5.5% to 6% is entirely possible” .

Indeed, inflation, still high in the euro zone, could push the European Central Bank to tighten its monetary policy again: a decision which could raise the level of rates. The ECB must decide on Thursday.

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