Property loan: will the impact of the deterioration of the French national debt?

Bruno Le Maire, Minister of the Economy, assures that the downgrade of France’s rating by Standard and Poor’s agency will not have “no impact on the daily life of the French“. Before adding: “It’s like we went from 18 to 17 out of 20» «We will not raise taxesthere are already too many taxes in france», repeated Prime Minister Gabriel Attal on Franceinfo this Monday morning.

The US agency Standard and Poor’s rates the French sovereign debt and raises it from AA to AA-. Assesses France’s ability to repay its debts. This is the first deterioration in this indicator since 2013. Could this decision affect lending rates, which are currently continuing to decline for the 5th month in a row? The rates negotiated by real estate broker CAFPI for its clients in May reached 3.60% for 10 years (-3 hundredths), 3.66% for 15 years (-3 hundredths), 3.78% for 20 years (-1 hundredths) and 3.93% over 25 years (stable), i.e. rates close to those practiced in July 2023. If the reductions remain marginal compared to last month, they are part of a broader movement.

No impact in sight

Caroline Arnould, CEO of CAFPI, wants to be reassuring: “This should have no impact. The downgrade from AA to AA – is slight, it’s mainly a warning shot for the government to accelerate debt reduction. At this stage, French debt remains of good quality for investors.” The same story from Maël Bernier, director of communications and spokesman for MeilleurTaux: “This should be monitored depending on the future development of OAT (note the editors of the financial instrument issued by the French state for the purpose of obtaining funds). As of today, the latest scales are either declining or stable, so don’t panic. But again you have to follow the OATs.”

Cécile Roquelaure, Studio Director at Empruntis, “he understands the concerns of the French. When a country gets downgraded by a rating agency that counts a lot like Standard and Poor’s, which is a big agency, then it offers fewer guarantees, which adds a little bit of financial uncertainty.“. However, he remains positive: “A decrease in rating usually leads to an increase in the national debt and thus the loan for real estate, which is theoretically more expensive, but it is not an exact science. Bruno Le Maire is not wrong when he assures that the downgrade will not have an impact on the daily life of the French, the news of this downgrade was expected, so it will not change much in terms of credit. Borrowers can be reassured, especially since the banks are very willing.”

A rating that remains attractive

A vision shared by Pierre Chapon, co-founder of Pretto, a real estate broker: “The impact of this downgrade on mortgage rates should be limited: decisions expected and already anticipated by the markets in the price of government bonds, which banks use as a benchmark for setting interest rates. This was confirmed at the beginning of the week, when the rates of French government bonds even recorded a slight decrease.“. Sandrine Allonier, spokesperson for the broker Vousfinancer predicts: “The rate cut by the European Central Bank, the ECB, announced on Thursday should balance out the negative impact that might have been there… ​​So ultimately no impact can be expected unless the other agencies downgradeE.”

Economist Mathieu Plane, deputy director of the French Observatory of Economic Conditions (OFCE – Sciences Po Economic Research Center), shares the opinion of various brokers interviewed. “The expected impact of this downgrade is extremely minimal. Standard and Poor’s already placed France in a negative outlook in December. So it is not a gigantic surprise, nor an unpredictable shell. What markets don’t like is the unpredictable“. Moreover, this assessment remains honest. “The valuation, although lowered, remains attractive. We are not in a scenario where the control of public finances no longer exists. In 2012 we were on 20/20, we were excellent, now we are at the bottom of a very good range. The short-term financial risk is zero“, he adds. According to him, the question mainly concerns the response that the government will provide. Will it take this downgrade into account and tighten the budget screws more?

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