Mortgage rates hit new low

MORTAGE rates have tumbled to their lowest rate since autumn 2010, falling 0.51% since March to an average of 3.38% this month - but there are still very few buyers in the market.

A study by Observatoire Crédit Logement/CSA showed that the number of loans agreed for buyers last month fell by 26.2% from the previous year; with numbers down 31.9% over the first nine months of 2012.

It said that in August building had dropped significantly and then in September, when the market usually returns to full strength, it had not done so.

Report author Prof Michel Mouillart, an economics professor at Paris-Ouest University, said: "We have never before seen a fall of such a magnitude and at such a speed. During the depression of 2008-9 we saw similar, but it took two years: this time it has taken one year."

Interest rates (before insurance) are now nearing their lowest since 1945, with the previous low point being in 2010 when rates bottomed out at 3.25% but despite mortgages being almost as cheap as they have ever been the market has shrunk significantly.

Fears over the economic crisis and the cost of living have hit people's confidence and the disappearance of the prêt à taux zéro (PTZ) interest-free loan for old buildings has turned off potential buyers. In addition, prices in general have not fallen to match the lack of business and this, plus a rise in deposits needed to get a loan, has slowed sales.

The slump comes against a background of increasing lending since 2001 when the total mortgages stood at €70.8billion, €87.3bn in 2003, €143.7bn in 2005 and €170.2bn in 2007.

This year, the total lending is expected to be a little more than €115bn - which is down around 30% on the €162bn in 2011.

Housing is not the only sector affected as the Association française des sociétés financières also says that household borrowing is down 11.2% on 2011, car loans have slumped 15.8% and personal loans have fallen 15.4%.