The decline in real estate rates is faster than expected

In early April, real estate interest rates continued to decline. This decline since the beginning of the year has been much sharper than we had anticipated.

Who would have thought that interest rates could fall so rapidly? Remember those “unfortunate people” of 3 or 4 months ago who already considered themselves lucky that they were able to get a loan over 20 years at 4.5% or, as we have seen, even at 4.9%. This month of April, broker CaFP told us that he could get 3.44% over 20 years for the best borrower profile. For normal humans we are higher than about 3.7% or 3.8%, but it still represents holy gain in purchasing power Compared to the end of last year.

So a couple earning 4,000 euros per month can now borrow about 230,000 euros, or about 20,000 more than in December. A benefit that should still be kept in perspective because when rates were around 1%, the same couple could obtain a loan of 300,000 euros.

Real Estate Expert (1/2): What to expect from fall in credit, rates? – 03/22

There Rates will continue to fall But can we go back to the levels of 3 years ago? At the moment, it seems quite unlikely or even impossible that we will go down to 1% in the short or medium term. But the decline that has begun will continue and perhaps at a more sustained pace than initially thought. An expected ECB rate cut could speed things up. We’ve been betting on real estate rates for 20 years ending the year at 3.2%, with some already envisioning 3% or even lower. And as a result the purchasing power of families has further increased. So our couple with an income of 4,000 euros can increase their borrowing capacity to about 250,000 euros at 3% interest. So we would like to see a profit of 40,000 euros a year.

Wait to get a cheap loan?

With this in mind, should we wait to borrow and get a cheap loan? This can be a very poor calculation because in a real estate purchase, the only thing that can be renegotiated is the interest rate. But for it to be worth it after taking into account the additional costs, there must be at least a one point difference between the rate received at the beginning and the rate received now. Sometimes a difference of 0.7 points may be enough but only if you have borrowed a lot. Moreover, it is more profitable to renegotiate your loan in the first years of repayment.

If a household prefers to wait until rates fall to 3% to open a loan, it can renegotiate it only when these rates fall to around 2%. Which is absolutely impossible at the moment. If, on the contrary, this family gets 3.8% interest now, it will probably be able to negotiate again early next year, because for now 2.8% or 2.9% seems quite plausible. Moral: In real estate, be careful with upfront financial strategies. The right time to buy is always yours.

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