“Mortgage rates go up 25% in a month! » Publisher by Charles SANNAT

My dear impertinent, dear impertinent,

“Real estate credit: heat stroke in interest rates with rising inflation”, headlines the magazine Desafíos, which is alarmed by the rise in mortgage rates.

“Given the rise in inflation, banks continue to raise mortgage interest rates. With the tightening of loan conditions, it becomes more complicated to borrow.

The sub-1% mortgage rate boom period is over! Borrowers who want to finance a real estate project will have to pay more: the month of April saw an increase in interest rates faster than expected, after the increase observed at the beginning of the year. While inflation was accelerating, up to 5% in a year according to INSEE, due to the Russian invasion of Ukraine, which caused the prices of energy and certain raw materials to skyrocket, I‘OAT 10 years (the interest rate on French government bonds) has skyrocketed, exceeding 1% since March 28, an unprecedented situation since… 2017! This state loan is used as a reference to set the level of mortgage rates.

And these have increased, therefore, “from 0.15 to 0.45 points depending on the duration of the loan and the profile of the borrowers”, notes the broker Meilleurtaux. The average rates offered, excluding insurance, currently amount to “1.25% at 15 years, 1.45% at 20 years and 1.65% at 25 years,” says Sandrine Allonier, director of studies at the broker Vousfinanciar. But there are still significant differences offered depending on the income levels of the borrowers. Thus, according to the Pretto broker, over 15 years, the rates vary from 1.53% for those who earn less than 40,000 euros per year to 1.18% for those who earn more than 80,000 euros per year. Over 20 years, the rates can go from 1.62% to 1.29% and over 25 years, from 1.77% to 1.44%”.

10-year rates skyrocket!

And yes, the rates are through the roof and no, it’s not “just” the fault of the war in Ukraine, evil Putin or even energy prices or even inflation.

No, what is pushing rates up is simply that the central banks have announced that they are going to… raise rates! The FED, the American central bank, announces 7 rate hikes in the next 12 months. Considerable.

What is pushing rates up is also that central banks are stopping buying everything and feeding the bond market! Central banks are phasing out their asset purchases. result? There is less money in the markets and silver prices are rising which makes a lot of sense.

Watch out for rate hikes!

Take France. The “1 year” column means that for a year, the French rate has increased by 122 basis points, which means 1.22%, if today (first column) we are at 1.14%, a year ago the French rate was negative by 1.22%: 1.14%, that is – 0.08% negative rates.

It was the blessed and perplexing time when you had to pay to invest your money!!!

With a 10-year rate today of 1.14% to which you can add a bank margin of 0.30%, we quickly reach 1.40 or 1.50% without insurance for a mortgage rate.

If central banks continue their monetary tightening, rates will continue to tighten.

In the short term, we should quickly see real estate loan rates above 2% and then 3% as prices remain very high.

We should have a downward market trend in the next few weeks.

However, this movement will not necessarily be sustainable, because at the end of the road and if we let rates rise too fast and too high, there will be a bond crisis, a real estate crash and, above all, a state solvency crisis.

Therefore, central banks will have to come in quickly to limit market enthusiasm and intervene to regulate interest rate markets.

In the meantime, be careful with real estate.

It is already too late, but all is not lost.

Get ready!

Carlos Sannat

“Insolence” means “impertinence” in Latin.
Write me at charles@insolentiae.com
Write to my wife helene@insolentiae.com

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