France mortgage rates rise, threatening new housing construction

Mortgage interest rates in France are continuing to rise, creating significant challenges for the housing sector. According to data from brokers such as Pretto and CAFPI, average rates for 15, 20, and 25-year loans are climbing, with projections suggesting rates could reach a cap of 4% by the end of the year.

This upward trend is particularly damaging to the new housing construction market. New builds are structurally more expensive due to environmental standards, making buyers more sensitive to interest rate fluctuations. Consequently, construction permits in France have seen a decline, with the number of authorized new homes over the last twelve months being approximately 10% lower than the average of the previous five years. This trend suggests that government targets for housing construction may not be met.

While the Banque de France recently raised the usury rate for fixed-rate loans of 20 years or more from 5.29% to 5.40% to provide banks with more maneuvering room, experts note this is insufficient to offset the increased borrowing costs for households.