The real estate loan, livret A: what is the view of the rates?


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The Governor of the Banque de France gave his position on inflation, Livret A rate changes and mortgage rates in the coming months.

Interviewed by RTL on Friday, François Villeroy de Galhau, Governor of the Banque de France, gave his position on the evolution of the Livret A rate and mortgage rates in the coming months.

The perception of inflation

Inflation in France reached 5.9% in the last 12 months (source Insee). This is the lowest in Europe, where the average is 9%. The Governor of the Banque de France predicts that the peak of inflation will be reached at the beginning of 2023 and that it will begin to fall again during 2023 to 4% or 5%, to return to 2% in two to three years. . This peak of inflation is expected to be around 6%, a figure to be taken with great caution due to the uncertainty of energy prices and gas prices.

François Villeroy de Galhau considered that the increase in interest rates was a normalization, after a period in which interest rates were very low, because there was not enough inflation. “We can take the example of real estate credit: real estate credit at a time of 1.1%, 1.2%, historically low rates, they gradually increased around 0.1 per month; but I quoted you the average for the last 15 years, maybe we have forgotten, it was 2.7%. We are now at 1.5: look, we are still very far from the historical average,” he explained to RTL.

The outlook for mortgage payments

The usury rate is equal to the interest rate (including insurance) above which banks cannot lend. It protects borrowers from excessive fees that banks may charge. It is set and revised every three months by the Banque de France. For this, it is based on the average effective rates charged by credit institutions, which has increased by one third. For home loans to individuals, this rate is currently set at 2.60% for fixed rate loans of less than 20 years. This threshold should increase on October 1st.

But professionals in the sector, especially mortgage brokers, criticize the very slow evolution of these wear rates compared to the current economic context. In fact, nominal bank rates are currently around 1.85% on average over 20 years. This leaves little room for maneuver due to the fact that the wear rate includes all costs (particularly the borrower’s insurance). According to the union of credit brokers, this will lead banks to refuse 45% of credit files. This is why professionals in the sector are uniquely calling for a rapid increase in wear rates.

But the Governor of the Banque de France does not like this point of view: “It is a question of protecting borrowers. What we will do, at the end of this month, is to apply the current rules, which will lead to a well-proportioned increase in this ceiling rate. We told this to the Minister Bruno le Maire, and to the banks: it may be possible to resolve the cases of more difficult access to loans that may have occurred in recent weeks, more already for the oldest borrowers. he said to RTL.

The outlook for Livret A rate

The Livret A rate is regulated. It is calculated based on the half-year average of the inflation rate and short-term interbank rates (EONIA), rounded to the nearest tenth of a point. It cannot be lower than the floor rate of 0.50%. The government has the possibility to increase the rate if it deems that the circumstances require preserving the purchasing power of savers. It made a decision after consulting the Governor of the Banque de France.

Its rate increased from 1% to 2% on August 1. Will it be raised again on February 1, 2023? “I cannot tell you a number now, because it depends on the average of inflation and interest rates at the end of the year, we will calculate in January. But there will be two important increases this year, because from 0.5% at the beginning of the year to 2% now, without a doubt there will be a new increase in February next year,” explained the Governor of the Bank of France .

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