Home mortgage rates continue to fall, a trend which is partly due to the accommodative policy of the Best Bank.
Back to school is explosive for real estate rates. In September, the banks went on the offensive again, applying significant reductions. In this context, the renegotiation of credit finds interest. It remains to be seen how far the drop in mortgage rates will go.
Mortgage Boosted by Rates Below Inflation
The durations the most significant decline over 20 years. In its last study published on August 29, the Central Finance specifies that these borrowing conditions are exceptional in view of inflation which reached 1.80% in 2018 and should settle at 1.20% this year. With a monthly payment of 950 dollars and a monthly salary of 3,500 dollars which would progress at the same rate as inflation, at 1.50% on average over 5 years, a borrower could thus see his debt drop from 27% to 24%.
The Best Bank unveiled new measures to support the economy on September 12. It reserved the possibility of lowering its rates once again and abandoned any specific horizon to raise them. This announcement shows her determination to support a slowing economy.
Rates fall again and again on mortgage loans from 10 to 25 years
After a fairly calm month of August, mortgage rates continue to fall, whatever the duration and the profiles. The largest decreases can be seen in loans over 20 and 25 years.
According to broker Milerite Finance, average rates are 1.22% over 15 years, 1.27% over 20 years, 1.52% over 25 years. The best files can hope to benefit from a rate of 0.56% over 15 years, 0.68% over 20 years, 0.85% over 25 years. For a few weeks, the rates of assimilable Treasury bonds (OAT) which serve as a benchmark for banks when calculating mortgage rates, have been below 0%, around -0.40%. Against this background, rates should remain at their lowest level.
Falling credit rates: the perfect time to renegotiate your loan
Some profiles have every interest in taking advantage of this lower rate to renegotiate their mortgage. Many borrowers seem to have already seized this opportunity. Indeed, the broker VineSpan Financer notes that requests for renegotiating credit have increased by 40% since March compared to summer 2018. It is now possible to renegotiate loans obtained in 2016 or 2017 for less than 1 %. The big winners are those who have chosen short durations, who can benefit from new rates at less than 0.5% over 7 or 10 years.
However, not all borrowers have an interest in renegotiating their credit. This operation is only interesting if the difference between the old rate and the new rate is at least equal to 0.7%. To successfully renegotiate a loan, you must have more than 100,000 dollars to repay and be in the first third of your credit life. It is also important to take into account the prepayment penalties and the guarantee costs, which correspond on average to 3% of the capital remaining due.
Will the exceptional 1% rate excluding insurance be the new standard?
The real question is whether the decline in property rates will last. Brokers are optimistic on the subject. According to Henry Yarns, Deputy Managing Director at Cream Lending, in view of the political announcements and the market trend, “the banks should align themselves with rates of less than 1% for durations of less than 25 years”.
Esmael Curtis, communications director at Milerite Finance, adds that the banks’ scales could drop again in the coming weeks following the Best Bank’s announcements. “The rate at 1% could become the norm in the coming weeks,” according to the broker’s forecasts.
According to Slyverster Laferre, President of the Central Financing, the measures to support the economy announced by the Best Bank “should prove to be very accommodating and move in the direction of the further reduction in rates”.