What to expect for loan rates at the start of the year? (Credits: © Fokussiert – stock.adobe.com)
In 2021, mortgage interest rates again broke records, averaging 1.05% in the last quarter of the year. But can this situation continue in 2022?
Mortgage interest rates flirt with 1%, sometimes less for the best profiles. Very favorable to borrowers, this situation could however not last forever. In any case, these are the conclusions recently delivered by the CSA/Credit Logement observatory. Why are interest rates likely to rise? What level of increase should we expect? Here are the assumptions about what could happen in 2022.
2021, an exceptional year for mortgage loans
While 2020 was irreparably marked by the start of the Covid-19 pandemic, 2021 allowed the mortgage market to get off to a great start. A new record was even reached: new home loans, excluding renegotiations, loan buybacks and bridging loans, reached the sum of 190 billion euros. Compared to 2020, a rebound of +4.6% in the number of files granted was recorded in 2021.
If 2021 has been such a prosperous year, it is in particular thanks to a dynamic new and old real estate market, but also thanks to extremely low interest rates. Over the last quarter of the year, the average nominal interest rate, excluding creditor insurance, was thus 1.05%. Over short periods and/or for the best profiles, it was even possible to obtain a loan below the symbolic bar of 1%.
Why could real estate rates rise in 2022?
In mid-January 2022, the average interest rate calculated by the CSA/Crédit Logement observatory was 1.07%, a very slight increase compared to the end of 2021. But this increase could well take more magnitude over the months according to the study’s forecasts. In the words of Michel Mouillart, professor of economics in charge of presenting the results of this analysis, real estate rates have reached “a floor”. After reaching record highs, credit conditions could even pick up in 2022.
Several factors lead the CSA/Crédit Logement observatory to anticipate a rise in real estate rates. First, the level of inflation. With a price increase of +2.8% in December 2021, it is difficult not to envisage rates rising, even though they remain very much below this level of inflation. In addition, according to the Banque de France, this price increase should continue, with an expected average of around +2.5% in 2022. The key rates of the European Central Bank (ECB), meanwhile, are announced to be stable until the spring, while government bond rates will gradually rise. These are all factors that make it possible to predict a probable rise in real estate rates over the course of the year.
Read also: Interest rates: the year 2022 starts well for mortgages
What will be the borrowing conditions in 2022?
Many parameters are taken into account to determine the evolution of mortgage interest rates during the year 2022. However, experts from the CSA/Credit Logement observatory envisage an increase of 0.20 to 0.25 points compared to 2021. This would therefore bring rates to a still low level, around 1.25 or 1.30% on average, all loan terms combined. A moderate increase therefore, which will still leave great opportunities to buy a main residence or to invest in rental property.
Note that at the start of 2022, mortgage interest rates have not yet started to rise. It is therefore still possible to borrow at less than 1% over 15 or 20 years, respectively 0.86 and 0.99% on average, and at 1.13% over 25 years, the maximum duration of financing according to the new rules of the High Financial Stability Council, except in rare exceptional cases.