Inflation is back in France. Far from the levels reached in the 1980s, it stands at around 2%, beyond the averages recorded over the past four years. What impact on credit rates? How are borrowers taking advantage of this price increase? For you, Solution Finance takes stock.
Rising prices and inflation are confirmed
With a summer that shows an annual consumer price index up 2.3% year on year, inflation is indeed back. Mainly due to the increase in energy prices (+ 14% over a year), it is also reinforced by the increase in taxes (especially on tobacco). Finally, food and fresh products are also on the rise and are contributing to this inflation which is taking hold.
Could this return to inflation lead to a rise in borrowing rates? For the moment, nothing like this has been observed. Rising rates are far from inevitable and there is no indication that credit conditions are deteriorating by the end of the year.
The MCB although it has started to reduce the payment of cash, does not wish to raise its key rates before the summer of 2019. The yield on government bonds, sources of funding for banks, therefore remains at very low levels. In addition, banking establishments still have the will to win new customers through mortgage loans and continue to engage in strong competition which leads to a general level of rates which is still very attractive.
Real rates going into negative territory
Average mortgage rates are still at levels close to their historic lows. The average mortgage rate at the start of the school year was 1.43%, stable since the start of the summer.
Traditionally, banks wait for the back-to-school period to offer their latest commercial offers, before the market goes dormant for the winter. There is therefore no cloud on the horizon for the borrowing conditions.
As a result, for borrowers, 2% inflation is pretty good news. Mechanically, the rise in prices along with a very low cost of silver, leads to real rates which become negative. So, in theory, today, borrowers are making money by going into debt.