Lower mortgage rates in 2019 for the real estate market

With very low interest rates in 2018, many people thought that it would be the ideal moment to invest in real estate. Against all expectations, the context remains almost as favorable in 2019 with minimal increases in interest rates for most mortgage durations. In January, we saw increases of less than 0.05% for loans over 10, 12, 15, 20 and 25 years. Moreover, a decrease of 0.02 points on 7-year mortgage loans has been noted at the start of 2019, which resulted in a rate of 0.86% instead of 0.88%. 

The rates obtained by the best borrower profiles have also stabilised. This represents a particularly interesting situation for people wishing to purchase a property or real estate through a mortgage loan. In January, most borrowers were purchasing their principal residences (82%), followed by rental investments (17%) and finally purchases of secondary housing (1%).

For most experts, such interesting rates were not likely to continue into 2019. Major increases were expected in the following weeks. However, according to the March reports and figures, quite the opposite happened. It has been observed that average interest rates have decreased for all mortgage durations. For long-term loans specifically, minor decreases were noted: 0.01% down over 15 years and 0.02% over 20 and 25 years. For mortgage loans under 15 years, the rates cut are more significant with a decrease of 0.93 point over 10 years and 1.08 points over 12 years. 

Finally, a slight decrease (0.07%) is to be reported for 7-year mortgage loans. The best rates reached during March are on a downward trend. Historically low interest rates are achieved for loans over 15 years (0.80%) and over 20 years (1%). This should highly interest potential future buyers and encourage them not to wait too long.

Following these observations, it is clear that the current period is very favorable for future buyers. The overall decline in interest rates does not only occur for short mortgage durations but also for more popular and traditionally acclaimed ones, such as 15 and 20 years. In those particular schemes, the last rates recorded in March are still lower (around 0.05 points) than those reached in December 2016. For the professionals of the real estate industry, several factors can be mentioned to understand this decline. 

The European Central Bank has confirmed that it will not change its key rates, allowing banks to use as much as possible the most of profitable conditions. Banks are constantly trying to attract new customers in a highly competitive landscape in which fierce competitors are offering the lowest possible rates to potential buyers. Many of those want to take advantage of the opportunities created by this very favorable situation. Last but not least, the decline in wear rates gives borrowers a non-negligible guarantee against a sudden rise in interest rates. It is not unrealistic to expect this downward trend in interest rates to last a few more months, but it is safe to say that it will not last forever.

A very positive and encouraging environment has been in place for borrowers since the autumn of 2018, with interest rates of 1.20% on average were being granted for 20-year mortgage loans. The attractiveness of the borrowing conditions and rates in the first quarter of 2019 could be maintained until June according to the most recent estimates. 

On the other hand, this might not last for the rest of the year, as there are concerns that could change some trends. Indeed, the consequences of withholding tax, that could generate a drop in buying power, could harm real estate acquisitions. However, there is no risk of significant increase in mortgage rates over the year. Some current favorable tax schemes such as the ‘Pinel’ law, ‘PTZ’ and the ‘Denormandie’ scheme, will help to make a smart investment decision, especially in developing areas. It is therefore recommended for future buyers to start their project during the first half of 2019.