You are preparing a property purchase in France and you wonder how to obtain a good mortgage rate, and above all what that rate changes to the value of the property you are looking at. This article was written in October 2019, at a time when French mortgage rates had reached a historic low. I have kept it for its reasoning, which holds whatever the level of rates: understanding what moves them, preparing your application, and measuring their effect on prices. The figures quoted are those of the time, and are presented as such.
The context of 2019: ten years of decline
In 2009, French mortgage rates were around 4.5 %. Ten years later, they had fallen below the symbolic threshold of 2 %. This fall mechanically widened households’ borrowing capacity: for the same monthly payment, a buyer could finance a markedly more expensive property in 2019 than in 2009.
That period ended in 2022, with a rapid rise in the European Central Bank’s policy rates. The reasoning below therefore works both ways: what supported prices for ten years can hold them back when credit becomes dearer.
Preparing a mortgage application
Low rates do not guarantee a loan. The bank lends to a household, not to a property, and it first assesses the risk of non-repayment. A well-prepared file reassures and negotiates better.
Simulate before applying
A mortgage simulation gives an estimate of your borrowing capacity and of the monthly payment you can bear. It serves three purposes: setting a realistic budget, framing the property search, and arriving in front of the adviser with a coherent project. Since 1 January 2022, the recommendations of the High Council for Financial Stability (Haut Conseil de stabilité financière) cap the debt-service ratio (35 % of income, insurance included) and the loan term (25 years as a rule), with a limited margin of exception for banks. These caps did not yet exist in this form in 2019, but today they are the first filter applied to any application.
Using a mortgage broker
The broker is an intermediary between the borrower and the lending institutions. The broker compares offers, presents the file and negotiates the rate, the insurance and the fees. This help is useful to those discovering how French mortgage lending works, or who lack the time to consult several banks. It has a cost, generally charged to the borrower or borne by the bank as a commission; it is worth asking about it at the first meeting.
Borrower’s insurance
French legislation on loan insurance has been relaxed in stages. Since the Law of 28 February 2022, known as the Lemoine Law, the borrower can cancel the insurance contract at any time in order to take out another offering equivalent cover. On a long loan, the insurance often weighs as much as the negotiation of a few tenths of a point on the nominal rate.
What moves the rates
The role of the European Central Bank
The ECB sets its policy rates, that is, the terms on which it lends to banks or remunerates their deposits. These rates directly influence Euribor, the rate at which banks lend to each other, and in turn the cost of the funds that banks turn into mortgage loans.
Between 2014 and 2019, the ECB kept its policy rates at zero or below. Lending to another bank or depositing cash with the central bank earned little, or even cost money. Banks therefore favoured lending to households, even at very low rates, which explains the continuous decline observed over the period.
The limit: banks’ profitability
In 2019, banks’ margins on mortgage lending had become very thin. A further significant fall seemed unlikely, as did an immediate rise. The most reasonable scenario at the time was stagnation. With hindsight, that reading held until 2021, before inflation and the ECB’s response changed the picture. This is a reminder that any rate forecast is conditional: it depends on monetary policy, which itself depends on inflation.
The usury rate
One last mechanism is worth knowing. French law prohibits lending at an annual percentage rate of charge that exceeds by more than one third the average rate charged in the previous quarter (article L. 314-6 of the French Consumer Code). This ceiling, known as the usury rate (taux d’usure), protects the borrower, but it can also block some applications when rates rise quickly, as in 2022 and 2023.
Mortgage rates and property values
This is the point that concerns my work most directly. When an expert determines a market value, the expert analyses recent transactions of comparable properties (Charte de l’expertise en évaluation immobilière, the French property valuation charter, 6th edition, Title III, §2.1). Those transactions were financed on the credit terms of the moment. A market where people borrow at 1.5 % does not produce the same prices as a market at 4 %.
Three practical consequences:
- The valuation date matters. A 2021 valuation cannot be reused as it stands in 2024. The Charter in fact recommends a new visit beyond two years and a formal update in the meantime (Title II, chapter 5).
- The comparables must be contemporaneous. Comparing a property with sales signed before a turn in rates leads to an out-of-date value. The expert flags this and weights the references accordingly.
- For a lender, market value is not the only basis. The European Valuation Standards 2025 (EVGN 2) and the Charter (Title III, §1.15 and §1.16) describe mortgage lending value and prudent value, which strip out speculative elements and take a sustainable view of the property over the life of the loan. That is the value the bank uses to measure its security, regardless of the price paid.
Key points
The low rates of 2019 eased access to home ownership and supported prices. They did not make every purchase sensible. The price still has to be judged against the local market, the condition of the property and the intended holding period. A well-prepared mortgage application, negotiated insurance and a clear reading of rate movements are the levers within reach of any buyer. The question of the property’s value is a separate analysis, which the level of rates does not replace.
Further reading
The Method page describes how a market value is established and updated. Two articles extend this subject: how to estimate the average property price in your town and what a valuation report contains.
What next
Does this question arise in your case?
Describe your situation in three questions. I reply by email or by phone to tell you which report answers it, in what timeframe and at what price.
Free quote, by email or by phone. No commitment before the quote is accepted. Fees are never linked to the value of the property (Charte de l’expertise, Title I, §2.1).
