Interest rates for loans to buy property in France continue to fall

Mortgage interest rates have been falling continually since the beginning of the year in France, sparking hopes of a boost to the property market.

Average interest rates on a mortgage have dropped every month of 2024 so far, reaching a low of 3.8% in mid-April, says market watchdog Observatoire Crédit Logement (CSA).

“Since the end of 2023, rates have fallen by an average of 10 basis points (0.1%) per month," said Michel Mouillart, CSA spokesperson.

In December 2023 rates were at an 11-year high of 4.21%. 

The trend is likely to continue, albeit at a slower pace, and combined with economic tweaks from the European Central Bank, may see rates reach 3.25% by the end of the year. 

Whilst still a long way off from the historic lows seen during the Covid-19 pandemic, when rates fell to below 1.5%, this will be a significant year-on-year drop and likely to lead to more people opting to buy now instead of bide their time.

Banks more confident to loan but buyers hesitant 

Alongside a drop in mortgage rates, banks are increasing the number of loans handed out in a bid to spur buyers into making purchases. 

The number of property loans given by banks increased 46% between December 2023 and March 2024, with the total amount of money lent more than doubling (52% higher) compared to the previous months.

“Never in the history of mortgages have we seen a rebound on such a scale and with such vivacity,” said Mr Mouillart.

“Although we are not close to the levels seen in 2019, the second half of 2024 should see an acceleration in new lending,” he added. 

Read more: Property buyers in France scammed out of €26,000 by fake bank advisor

Even if banks are more eager to give out mortgages, buyers are still hesitant over high rates, which has helped spur the drop in interest rates. 

Buyers see themselves in an advantageous position – access to a mortgage pending – with the market supply outstripping demand and putting purchasers in the driving seat. 

Read more: How much can property buyers in France negotiate down prices in 2024?

As rates fall, however, banks are hoping more buyers will take the plunge. 

Another shake-up of mortgage rules in France may also help kick-start the market. 

MPs will debate a bill at the end of April which would see the debt-ceiling ratio, currently at 35%, changed. 

Current rules mean that the expenditure on a mortgage for buyers cannot exceed 35% of the monthly income of the person/people seeking the loan. 

Banks can relax this rule for 20% of applicants, and Finance Minister Bruno Le Maire wants to see this increased to at least 40%, allowing more people, mostly first-time buyers, to acquire a home. 

A change at the end of last year saw the number of mortgages that could reach beyond the usual 25-year limit expanded. 

Read more: France eases mortgage rules to allow more loans of 27 years