Real estate prices are going up

Real estate prices are going up


It has been expected and dreaded for several months … The rise in property prices has started well and indeed, and according to experts, it should also increase and continue.


Property Prices Rise /iStock.com – sureeporn

Rates that remain attractive despite their upward trend

Back in 2021, they were described as “historically low” … And it is true that with an average rate below 1%, housing loans encouraged shopping! However, the trend gradually reversed: from 0.87% (in 15 years) on September 21, they exceeded the 1% mark, only slightly exceeding it in March and then in April this year. And according to experts, the output will slowly but surely continue in the coming months. Despite this reversal of the curve and the continuing upward trend, note that real estate rates remain attractive, but in the inflationary context we are experiencing. At the expected inflation rate of 4%, the rates – according to some experts – will reach 2% by the end of the year, in fact they will remain below the rising cost of living.

When the Fed coughs, the OAT sneezes …

The causal relationship between the rates applied by the US Federal Reserve (FED) and the real estate lending rate for French individuals can be explained as follows … When the Fed raises its key rate, this increase will cause the OAT to rise. This has an impact on bank refinancing, which is revised upwards … And banks are passing this increase on to their customers, in particular by “selling” their mortgages at a higher price. However, the US Federal Reserve has just raised its key rate by 0.5%, following the same movement in fixed rates that banks practice. Note: Variable rate mortgages are correlated with “Euribor rates” and are therefore not affected by this mechanism.

An upward trend that is not homogeneous but generalized and should last …

To deal with the health crisis, states have exploded their debts, supporting a recovery in the 10-year OAT. In addition, the European Central Bank (ECB) could be tempted to adapt to the recent key rate increase decided by the Fed in order to keep the euro competitive against the dollar. All of these factors inevitably have an impact on the mortgage lending policies of European banks, although not all of them act synchronously. Indeed, the rates provided still vary by facility. Some banks choose to increase them in small proportions, but at normal rates. Others adjust them less often, but more sharply. However, one thing is certain … The economic context will force all banks to follow the upward trend, while other factors, including in particular the geopolitical context, are encouraging them to tighten lending conditions at the same time. …

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