Borrowers have benefited from particularly low mortgage rates since the end of 2016. Between these very profitable rates and the extension of the Pinel law, which offers many tax advantages to investors in new rental properties, the last two years have marked an excellent period to invest in real estate.

Real estate credit: will the rise in rates take place?

But several signs point to an upcoming rise in mortgage rates. So we can ask ourselves: should we invest now in order to avoid this possible increase in rates? Let's take a point.

Historically low mortgage rates

The month of October 2018 was marked by particularly low mortgage rates, and this for all investor profiles. For 20-year bonds, they reach an average of 1.60% gross, which is very close to the record low ceiling recorded in November 2016 and which reached 1.55%.

Lowest rates for the best profiles

While these figures apply to all real estate investors, they particularly concern the strongest profiles. Indeed, banks agree to lower their mortgage rates, already considerably low, if investors present them with reliable files: financial contribution of more than 20%, above-average income, family and professional stability, etc. Thus, it is possible to find in mortgage rates a gap of up to 0.30%, between files considered good and files considered excellent. This leads some banks to sell borrowing rates over 20 years at 1.20% for the best profiles. What to embark on the adventure and look now for the best possible mortgage . Because if the situation has been stable for several months, with minimal variations in rates, several warning signs announce a possible increase in mortgage rates in the coming months.

What are the advantages for banks?

In view of these low mortgage rates, it is normal to wonder if banks can derive any benefit. In concrete terms, the direct financial benefit is much lower than if rates were to return to higher figures. However, by aligning themselves with low rates and offering discounts to the safest profiles, banks take very little risk and can thus keep, or attract, customers with them. By playing competitively, financial institutions can enrich their customer portfolio, which in itself is beneficial to them, but they will also have a pool of potential investors for years to come, during which mortgage rates will probably be revised upwards.

Towards a gradual rise in rates in 2019?

The current situation is paradoxical: rates are historically low and yet the financial context is such that we should observe a significant increase in mortgage rates for several weeks. At the previous low borrowing rate, set in November 2016, the inflation rate stood at 0.4%. In October 2018, inflation reached 2.5% in France, as evidenced by the main statistical indicators released by the Bank of France, which you can find here.

The financial situation has been gradually improving in recent months, which should impact borrowing rates. In November 2018, some banks are already recording an increase, albeit less, in their mortgage rate. They amount to 0.10% to 0.30% for the worst profiles. But this increase in borrowing rates remains low and limited to only a few institutions.

In addition, renowned institutions such as the High Council for Financial Stability encourage banks to increase their borrowing rates, given the economic context and the profits generated by banks. The latter having completed their objectives for the year 2018, they have every interest in keeping their rates low in order to attract as many customers as possible, before considering an increase in rates over the next year. 

The European Central Bank is still conducting a mission to buy back public and private debt by the end of 2018, which contributes to the financial security of the current period. However, and despite unchanged key rates until the second quarter of 2019, the end of this debt buyback policy will lead to economic instability and a potential increase in borrowing rates. The actual impact cannot be calculated in advance. 

It is therefore likely that mortgage rates will gradually increase during the year 2019, but it is difficult to determine the exact figures now.