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Savings, real estate loans: will there be an interest rate war?

LThe growth was brutal. In less than twenty months, twenty-year mortgage rates have risen from an average of 1% to 4%. Banks have ended the rise in the value of money caused by the tightening of monetary policy by the European Central Bank (ECB), which raised key rates for the tenth time in a row on Thursday (September 14).

For months, institutions have complained about losing money in the real estate lending business. Some have decided to stop lending while they wait to find the margin. Now it’s a done deal: all banks are scrambling to finance individual real estate… by early 2024. Meanwhile, access to real estate credit will become more difficult, with real estate prices falling shyly. cannot offset the rapid increase in borrowing costs.

Banks are quick to increase property loan rates to individuals when it comes to improving returns on deposits left by customers. If the public authorities decide to increase the rate of the Livret A and the Booklet of Sustainable and Solidary Development to 3%, in order to lock them at this level even for more than sixteen months, institutions that have significantly increased their rates. Bank books are an exception.

There is stability ahead

Online banks and banking subsidiaries of car manufacturers offer these products on attractive terms, but traditional bank customers fare less well. Those who agree to lock up money for a year, or even two years, can hope a little more by opening a term account. And again, the best rates are reserved for the wealthiest customers. Big chain banks have no interest in getting better returns on their customers’ deposits at the risk of increasing their refinancing costs.

According to the vast majority of observers, the rate hike decided by the ECB on Thursday, September 14 may be the last. However, it is futile to hope that the downward movement will start quickly. The most optimists consider it possible from the second half of 2024, while the rest do not expect it until 2025. Accordingly, the coming months are under the sign of the stability of the exchange rates.

A less turbulent environment than recently, which paradoxically should allow competition between banks to accelerate. Those with significant resources can be more aggressive with real estate loans, at least for the borrower profiles they are trying to capture. Institutions that want to attract savings may have to increase the rate on their savings or term accounts. On the other hand, it’s unlikely to see a return to paid accounts. I shouldn’t ask for too much.

Source: Le Monde



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