Mortgage rates: how are they set?

The interest rate of a mortgage has a direct impact on the total cost of your loan. But where do these rates come from? Who decides them? And why do they vary? Understanding the mechanisms of setting mortgage rates allows you to better negotiate your loan and choose the right time to buy.

1. What is a mortgage rate?

The mortgage rate corresponds to the percentage applied to the borrowed capital. It determines the amount of interest you will repay to the bank. It can be:

• Fixed: identical throughout the duration of the loan
• Variable: revised upwards or downwards according to an index
• Mixed: fixed for a few years, then variable

The fixed rate is currently the most common, as it secures monthly payments over time.

2. The criteria that influence mortgage rates

Several factors influence the setting of mortgage rates by banks:

• The key rates of the European Central Bank (ECB), which influence the refinancing cost for banks
• Economic conditions: inflation, growth, unemployment
• Monetary policy: increase or decrease in the cost of money
• The commercial strategy of each bank, according to its conquest or margin objectives

In addition to this, there are regulatory rules (such as the usury rate) set by French financial authorities.

3. Your borrower profile also impacts the rate

The proposed rate also depends on your personal situation:

• Your income and professional stability
• Your personal contribution: the higher it is, the more advantageous the rate will be
• Your debt-to-income ratio
• Your banking management (savings, absence of incidents…)

A good profile can allow you to negotiate a lower rate, or even obtain “premium” conditions with certain partner banks.

4. Why do rates change over time?

Mortgage rates are not fixed. They evolve regularly, up or down, depending on:

• ECB decisions
• Tensions in the bond markets
• Inflation and the global economic context
• Commercial strategies of lending institutions

That’s why it’s useful to be well accompanied to borrow at the right time, with the right partner.

Domacap: your broker to negotiate the best rate

At Domacap, we analyze your profile and the market context to negotiate the best possible conditions with our banking partners. We compare rates, anticipate trends, and support you in obtaining optimized and secure financing.

Conclusion

Mortgage rates depend on both macroeconomic factors and your borrower profile. By surrounding yourself with an expert like Domacap, you increase your chances of obtaining a loan at the best rate, with conditions perfectly suited to your project.