The cap on fixed 20-year mortgage rates will climb above 5% this month for the first time since 2012. 

It is a story of two sides. As mortgage rates continue to rise across the board in France, the real estate market is slowing and the average property price is falling. 

The revised cap on mortgage rates – the sixth consecutive rise since February this year – was announced by decree in France’s Journal Officiel on 29th June.  

It marks a new era of financial burden for prospective home owners. As of 1st July, the cap for fixed 20-year and over mortgage rates has been set at 5.09%. This is up 0.41% on June’s cap of 4.68%. It is the first time this type of mortgage has broken the 5% seal since 2012.  

It is a similar case for other forms of mortgages: the cap for a mortgage of less than 10 years is now 4.11% from 3.99% last month, and 4.84% for 10 to 20-year contracts, up from 4.45%.  

Pre-2023, France’s borrowing rates were reviewed by its central bank every quarter. Today they are reconsidered monthly, which explains the more frequent hikes that have been seen in the last six months. This new method was expected to end in July, but has now been extended until the end of the year. 

It is hoped that the new rates will make borrowing easier for potential buyers, and in turn loosen up the national real estate market, which has been experiencing contraction since the Covid boom.  

The lowest estimates suggest that sales have decreased by as much as 35% since this time last year, while other indicators point to a nationwide fall in property value of between five and 10% before the end of the year.  

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Photo source: Caroline Minor Christensen, Unsplash