French banks tighten credit conditions as interest rates rise

French banking institutions are tightening lending conditions and increasing selectivity due to rising refinancing costs and more fragile borrower profiles. Interest rates for credit consolidation are currently ranging between 5% and 8%.

Mortgage rates are also experiencing upward pressure. Average rates for 25-year terms have risen from approximately 3.60% in early September to nearly 3.90%, with projections suggesting they could reach 4% to 4.50% by December or even 5% for certain profiles by early 2027. This trend is linked to the rise in French government borrowing costs, with the 10-year OAT reaching levels not seen since 2002.

These shifts are particularly impacting low-income households, first-time buyers with low down payments, and borrowers over the age of 40, who may face higher insurance costs. Banks are now revising their rate scales every fifteen days to manage risks and regulatory ceilings, such as the usury rate (TAEG) set by the Banque de France.