We are staying in this comfort zone in March 2014, or even falling mortgage rates. This is contrary to our analysis last month in which market indicators mentioned the prospect of a rate hike in the medium to long term. In addition, some institutions such as ANIL, have just published their quarterly barometer and, unlike us, indicate a slight increase over the quarter.
So what’s going on?
First, let’s talk about the gap between Anil and the average rates that we indicate on our website.
This difference can be explained by the importance that banks currently attach to the financial contribution of borrowers in mortgage loan arrangements. Thus, there can be differences of 1 point and more when putting together a mortgage loan application. For example, you can get a loan with a 3.5% down payment versus 4.5% without down payment. Logically, such differences are not without consequences on the average rates communicated by the various market participants.
Then, this opposite between the announcement of a risk of a rise in medium-term rates and a fall the following month (even if this fall cannot yet translate a trend) is interesting to dissect:
This drop is proportionally greater over the longer periods: -0.05 points over the 10 years (from 2.9 to 2.85%), -0.10 points for the 25 and 20 years (from 3.25 to 3.15% and 3.55 to 3.45%) and 0.15 points for the 25-year-old (from 4 to 3.85%).
The effort made over longer periods may be a sign of banks’ adaptation to the real estate market: the slight fall in real estate prices does not release enough real estate purchasing power, the bank compensates by giving back attractiveness with longer durations.
Or it can also be a sign of the re-opening of the real estate market to first-time buyers, who have been largely forgotten, not to say excluded from the market since 2013.
In both cases, it is too much to talk about a trend. Can the analysis of next month’s rates and of the real behavior of banks in terms of lending over the coming month perhaps be able to draw a strategy for the next semester?
What borrowers allow?
We can finally emphasize that this decrease is not trivial over the 25-year period, because it allows the borrower to:
– reduce his monthly payment by 16.49 USD for 200,000 $ borrowed
– or reduce its credit cost by 4,949 USD according to the same criteria
In any case, what is increasingly certain is that the real estate market in 2014 will be more punctuated by rates than by the price of real estate itself. Indeed if rates go up, the market will stop, if rates remain stable at this historically low level, the market will continue to be supported by a slightly downward trend in prices …75,763 Internet users are already using our loan simulators and you?