The Banque de France announces a drop in rates which will revive real estate

The real estate loan market in France is experiencing a real shift. After a period marked by high interest rates, which hampered access to property, the trend is reversing. François Villeroy de Galhau, governor of the Banque de France, announced that mortgage rates fell below 3.4% in November 2024, compared to 4% in January. Such a drop is explained by a slowdown in inflation, the level of which is expected to reach 1.5% in 2025, after having weighed on the economy in recent years. This development represents a relief for borrowers, but its implications go beyond the simple framework of real estate. An easing of the cost of credit generally promotes economic recovery, and restores purchasing power to households and encourages them to invest. This dynamic could also impact other asset classes, notably cryptos. A more stable economy and smoother access to financing are encouraging some investors to review their strategies. With this drop in rates and the anticipation of possible monetary easing by the European Central Bank (ECB), the real estate market could return to more favorable dynamics.

Falling real estate rates, a breath of fresh air for borrowers

The decline in inflation plays a central role in the fall in real estate interest rates. François Villeroy de Galhau, governor of the Bank of France, underlined this link. Indeed, he declared that: “inflation, which was the acute illness of the French economy, is on the mend.” According to him, this stabilization gives a breath of fresh air to households, whose purchasing power had been undermined by the rise in prices and the rise in the cost of credit in recent years.

With an average rate below 3.4% in November 2024, the real estate market is beginning to reverse its trend after a period of strong growth which reached 4% in January. For several months, restrictive financing conditions had hampered access to property. Such a situation contributed to the reduction in the volume of transactions, which weighed on the entire sector. This change therefore constitutes a positive signal for borrowers, but also for real estate professionals, who hope for a gradual resumption of purchases.

In addition, this easing of rates can also be explained by the monetary outlook of the European Central Bank (ECB). Thus, the institution could lower its key rates by up to 2% by summer 2025, which would encourage banks to further reduce the cost of credit. “The French are starting to borrow again. This is good news for a gradual restart of real estate,” said underlines François Villeroy de Galhau. Such monetary easing, combined with more controlled inflation, suggests the end of the restrictive cycle which had slowed investment and weighed on consumption. From now on, economic players are scrutinizing the evolution of rates with the hope that this dynamic will continue and sustainably support activity.

What impact on investment strategies?

The decline in interest rates extends beyond the housing market. It could also modify investors' arbitrages, particularly with regard to riskier financial assets. In times of high rates, capital generally flows towards secure investments, such as government bonds or bank accounts, to the detriment of more volatile markets such as bitcoin and decentralized finance (DeFi). Thus, the current environment, marked by an easing of rates and a decline in inflation, offers more room for maneuver to investors, who could be tempted to redirect part of their liquidity towards more dynamic asset classes.

The monetary outlook of the European Central Bank (ECB) constitutes another key element in this recomposition of investment strategies. If the ECB lowers its key rates to 2% by summer 2025, as François Villeroy de Galhau anticipates, banks will have better conditions to finance the economy, which will lead to an increase in liquidity on the markets. Such relaxation would encourage greater risk-taking by investors, particularly on alternative assets such as cryptos. After having suffered from the monetary tightening of the ECB and the Fed in 2022-2023, these assets could regain strategic appeal, in particular among institutional investors, who had gradually moved away from this sector in favor of more traditional investments.

If this dynamic is confirmed, crypto could benefit indirectly from monetary policy, with renewed interest both on the financial markets and among savers looking for diversification. However, this development will depend heavily on the evolution of rates and the ability of the markets to integrate these new parameters without causing new volatility.

The announced monetary easing could revive real estate investment and revitalize financial markets, but its impact on cryptocurrencies remains uncertain. If the drop in rates encourages a return to riskier assets, its effect will depend on European economic policy, the evolution of inflation and the level of investor confidence. A reduction in ECB rates to 2% could redirect part of the capital towards cryptos, particularly from institutions, but caution remains in order. In a market seeking stability, the coming months will reveal whether this trend marks a temporary adjustment or the start of a new cycle for alternative investments.