Although the rise in mortgage rates is still small and marginal, it appears to be a permanent trend. After falling for around 3 years, fifteen banks have raised their rates since mid-May. The exceptional borrowing conditions should gradually come to an end.
Rising government bond rates
The main reason for this is the rising rate of government borrowing. Although there is no direct link between this rate and the rate offered by the banks, it is nonetheless an important indicator on which banking institutions base their decisions. As at 4 June 2015, the 10-year OAT rate was 1.24%, its highest level since October 2014 and one point higher since mid-April, when it hit its lowest point ever.
While it is possible to describe the increase in mortgage rates as exceptional given the long period of decline, this fact needs to be qualified since the few banks that participated in this rise increased their rates by only 0.05 to 0.30 points. For the vast majority of the other institutions, the offers were maintained in order to remain competitive and not to break the momentum of the market. For the same reasons, it is reasonable to expect rates to rise slowly and gradually.
Rising rates seem likely to become a widespread trend in the near future, as other institutions have indicated that they will also move in this direction. What's more, some economists estimate that the 10-year OAT rate could rise to 1.5% by the end of the year.
In order to attract new customers and interesting borrower profiles, banks can reduce their relatively high margins to offset the upward trend. This increase should also be tempered by bearing in mind that rates remain very advantageous. As things stand, the purchasing power of households should not be affected by this rise in rates.
