Mortgages & Property Loans : Slight decline in interest rates

The mortgage market changed significantly in January 2024. After two years of steady rises, the average interest rate on mortgages fell slightly. This fall, although modest, is an important indicator of current market dynamics and the strategy of banks for the new year.

Interest rate trends

In January 2024, the average interest rate on home loans was 4.15%. This breaks down into 4.08% for new-build home buyers and 4.14% for existing home buyers. This fall comes after the average rate reached 4.24% in December 2023, marking a significant change in direction after two years of rapid increases. In December, the increase had been just 2 basis points (bps), already signalling a slowdown in the rising yield curve.

The profitability of new loans has improved and is being maintained thanks to the stability of the European Central Bank (ECB) refinancing rate. This stability has made it easier for banks to increase the supply of loans, thus contributing to the slight fall in interest rates.

Analysis of the fall in rates

The fall in the average rate seen in January was rapid, recording a decrease of 9 bps in just one month. This reduction, which occurred at the start of the year, is unusual. Traditionally, such falls are seen in the spring. This year, however, banks seem motivated to revitalise the mortgage market earlier than usual.

This proactive strategy on the part of the banks is designed to stimulate demand for home loans, thereby encouraging renewed activity in the market. Banks are seeking to capture the attention of potential borrowers by offering more attractive lending terms from the start of the year.

Average loan ter

Alongside the fall in rates, the average term of loans granted in January 2024 was 248 months. This figure varies slightly depending on the type of property: 263 months for new-build property and 257 months for existing property.

It should be noted that the average term of loans granted has remained relatively stable, hovering around 20.7 years since last spring. This stability, despite monthly fluctuations, indicates a degree of constancy in the lending terms offered by the banks.

The start of 2024 marks a turning point, with a slight fall in interest rates for home loans, reflecting the banks' efforts to revitalise the market. This early fall in rates, combined with stability over the term of the loans, offers attractive prospects for borrowers. Banks seem determined to support the property market by offering more favourable financing terms, heralding a potentially buoyant year for the sector.

Updated date : 17/07/24
Creation date : 10/02/24

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