Home loan, life insurance, passbook…. The consequences of the rise in rates


The rate at which France is in debt, the 10-year OAT, continues to rise. And the impact on household wallets is already being felt, particularly on mortgages but also on your savings. Here is what awaits you.

It is an a priori technical phenomenon which nevertheless has practical effects on the budget of individuals. The rate of 10-year Treasury bonds (OAT), ie the fixed rate at which the French State borrows over a decade, is rising sharply. Since February 1, it has gone from 0.37% to 0.75% on Wednesday. It doubled in just two weeks. If the evolution of the 10-year OAT is particularly scrutinized, it is because this rate serves as a reference for most long-term fixed rates. Concretely, the banks will borrow long term on the interbank market at a rate slightly higher than that of the 10-year OAT before redistributing it, for example in the form of a mortgage, but with an additional margin that individuals will have to pay via the reimbursement interest.

It is normal for the interest rate of the 10-year OAT to rise when inflation increases, recalls Eric Dor, director of economic studies at the IESEG School of Management. A rational investor demands, when he lends money, to at least maintain purchasing power by claiming higher interest to cope with rising prices. In fact, inflation exceeded 5% in the euro zone and was close to 3% in France in January. Despite everything, the current policy of the European Central Bank is curbing the rise in interest rates on government bonds in order to limit the risk of a new financial crisis and the bankruptcy of a State in the euro zone. Caution in the face of rising inflation by the ECB, whose key rates are at historic lows, contrasts with the determination to act of the American Federal Reserve, specifies Eric Dor.

All the same, we are witnessing a turnaround where government borrowing rates were still in negative territory at the end of December, reflecting an exceptional situation due to the economic and health crisis. This is the sign of a return to normal, notes the economist Philippe Crevel. A return to normal which has concrete consequences for households.

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Starting with real estate credit. In February, given the rise in government borrowing rates, the banks had no choice but to increase their lending rates, under penalty of seeing their margins on mortgages shrink, analyzes Julie Bachet, the general manager of Vousfinancer. We are therefore still in a situation of extremely low rates, but it would therefore seem that this time we have really hit the floorabounds Mal Bernier, the spokesperson for Meilleurtaux.

Indeed, the rise in rates is proving to be very measured for the moment, around +0.2 points according to the broker Artmis. Average bank rates remain at historically low levels: 0.91% over 15 years, 1.04% over 20 years or 1.24% over 25 years according to Meilleurtaux. With the level of inflation today, real estate rates are negative. This is a boon for borrowers whose income grows at the same rate as rising prices. In addition, the rise in rates is perhaps the hope that property prices increase less because the number of individuals who can borrow could contract, analyzes Philippe Crevel.

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Livret A, life insurance… A limited impact

And what about your investments? For regulated savings like the Livret A, a rise in government borrowing rates is not not bad news. On the contrary, it could argue for a further boost in compensation, which has already increased to 1% on February 1. But you have to take inflation into account. A possible revaluation of the Livret A rate, for example on August 1, will not be of great help to the saver if inflation continues to climb, nuance Philippe Crevel.

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With regard to life insurance, here too, a rise in interest rates is a priori rather positive. The fact that the rates are rising gradually, but slowly, would offer the possibility of to better remunerate euro funds in the coming years, explains Philippe Crevel. In 2021, their return should be slightly below the 1.28% recorded the previous year. But again, it is anesthetized by the level of inflation. It is rarely good news for savers invested in fixed income or regulated savings products, specifies Philippe Crevel.

The dread of insurers, on the other hand, would be too sudden a rise in government borrowing rates. She would have a shear effect by reducing the value of old bonds held by insurers in their portfolios, underlines Linxea. As a result, savers could be tempted to make redemptions to place their assets in more profitable investments. But we are not there.

As for the stock market, theoretically, the rise in rates is not good news. A rise in bond rates generally penalizes actions because it improves the profitability of bonds, assets considered less risky by investors. But for all that, I would not leave the stock market to go to the bond market, especially if we consider that we are only at the beginning of a process, believes Philippe Crevel. If you buy a bond right away and inflation continues to rise, its value will go de facto to lower. On the other hand, on the equity market, the current situation requires choosing stocks that withstand inflation relatively well, such as banking securities or luxury goods, which can easily pass it on, provided that it remains moderate.

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