While it is common knowledge that mortgage lending rates have reached historically low levels, it may be interesting to understand why. Because before getting a credit, it is always advisable to inquire about the evolution of the rate to determine the right moment to buy. Return on the history of credit rates immo these last thirty years.
1988 – 2006: exceptional fall in mortgage credit rates
In the late 1980s and early 1990s, the average borrowing rate for a home loan exceeded 9%. A level such as the cost of credit is exorbitant for households and discourages first-time buyers especially as real estate prices are rising steadily.
Buy without personal contribution is then almost impossible. During the 1990s, mortgage credit rates then dropped considerably: – 4 points between 1992 (9%) and 1998 (5%).
This drop continues in the 2000s to reach its lowest level in 2006: 3.5%. The cost of credit then drops significantly. A first evolution of the rates very favorable to the purchasers.
2007 – 2008: the crisis, a pivotal phase
In 2007, borrowing rates rise again while the subprime crisis occurs in the United States, caused by variable rate mortgages granted in bulk across the Atlantic.
It is not long in touching Europe and France, so that we speak in 2008 of global economic crisis. Rates continue to grow throughout 2008 to reach the 5% threshold.
In this context of financial crisis, central banks are supporting a decline in borrowing rates in order to revive the economy.
2009 – 2018: towards the lowest rate in history
In 2009, therefore begins a vertiginous fall in mortgage rates. The average rate goes from 5% in early 2009 to 3.5% in 2011, then to 2% in 2015 before stabilizing around 1.5% in 2017.
So we see a very significant change in rates in 30 years since it went from 9% to 1.5%. To understand the impact on real estate loans, let’s take a look at a loan of € 200,000 to be repaid in 20 years.
In 1988, the cost of credit would have been € 231,000, higher than the borrowed capital. Today it would cost only € 31,000.