Liquidation. impact on financial markets
the statement of Dissolution of the National Assembly had an immediate impact on financial markets, with the yield on the 10-year Treasury note (OAT) rising markedly. In one day, the yield increased by 13 basis points, reaching 3.22%. This increase is explained by political uncertainty and the possible rise to power of extremists, which caused a strong reaction from investors. Rising OAT yields generally mean rising mortgage rates as banks adjust their interest rates based on these readings.
Despite this volatility, banks seem to want to maintain favorable lending conditions. Markets did not react to the liquidation announcement, with interest rates on French debt rising slightly. Banks may continue to lower mortgage rates by taking advantage of European Central Bank (ECB) monetary easing.. indeed The ECB cut its key interest rates on June 6, 2024 0.25 basis points, facilitating banks’ access to liquidity for lending to households. Patrick Artus, Economist at Natixisexplains Capital: that banks have no reason to offer lower lending rates than OATs pay, which could limit the fall in real estate rates.
Political instability. increase in mortgage rates.
The situation for borrowers remains uncertain. A rise in OAT yields due to political instability could lead to long-term real estate interest rates. This development will be bad news for those looking to borrow, as the costs of real estate loans are directly linked to the yield on OATs. In addition, political uncertainty can slow down the real estate market, as potential buyers may be hesitant to commit to large projects during times of instability.
Real estate rates That will largely depend on the results of early legislative elections scheduled for June 30 and July 7, 2024. If, as recent polls predict, the National Rally takes power with the appointment of Jordan Bardella as prime minister, markets may react. unpredictably. However, budget decisions will be monitored by the European Union, which could ease investors’ fears.
