Household investments in 2025: at the dawn of a new trend?

Environment for financial investments at the dawn of a new trend

A high savings rate and paradoxically weak investment: is the credit effect still at play in 2025?

Wave 19 of the BPCE L’Observatoire-Audirep barometer survey carried out in February 2025 shows that the forces driving savings behavior remain very powerful. The survey reveals that the French remain structurally skeptical and pessimistic when thinking about the future, a finding that remains true even in more affluent categories of the population. This can be explained by the resurgence of specific concerns such as the fear of being made redundant, the effects of unpredictability in the domestic political scene (even if these worries seem to have diminished somewhat), the anxiety-inducing context of international tensions, and concern about imbalances in the French government’s budget.

Levels of concern about public debt have remained high (70%) since June 2024 but there has been a slight easing of concerns related to the loss of employment (37%, down 5 points). Individuals who are most worried about potential tax increases are particularly concerned about losing their jobs, the size of their future retirement pensions, and what kind of future awaits their children or grandchildren.

These fears seem at odds, however, with the perception that their purchasing power remains largely intact (41%, down 4 points) and with the end of the ‘real balance effect’ (the typical increase in savings during periods of inflation to offset the decline in purchasing power of financial assets) resulting from the sharper deceleration in price inflation. However, it remains to be seen whether the trauma of the previous surge in inflation between 2022 and 2023 will be a factor in maintaining the French population’s strong propensity to save. In March 2025, the perceived attractiveness of saving still remained excessively high in the household confidence survey carried out by the INSEE National Institute of Statistics and Economic Studies. This behavior was reflected in the rise in the savings rate to 18.2% in 2024, well above its level of 14.6% in 2019. This phenomenon is expected to continue into 2025, albeit at a slightly slower pace.

18,2% This is the household savings rate in 2024

One notable fact since 2023 is the persistence of an apparently paradoxical situation that can, however, be given a rational explanation in macroeconomic theory. While the savings rate remains high, the financial investment rate – measured as the difference between deposits and withdrawals on all savings products relative to gross disposable income (GDI) – more than halved in 2023 (1.1% of GDI) and 2024 (1.9% of GDI) compared to the 5.7% of GDI noted in 2022. It is consequently impossible to use the correlation sometimes observed with the savings rate to explain the financial investment rate. This is because savings are allocated more to financing  investment in housing than to financial investments per se. Credit availability not only mechanically boosts the money supply (financial investments) but also limits the need to self-finance housing through savings, thereby releasing resources for other financial flows. In this way, the scarcity of mortgage loans in 2023 (growth in outstandings of just 1% compared with 5.5% in 2022) and especially in 2024 (-0.7% respectively) put pressure on household budgets and played a significant role in reducing financial flows over the past two years.

In practice, these budgetary constraints triggered a rise in the size of down payments on properties (all the more so as the return on financial assets had fallen below the cost of taking out a home loan) along with a reduction in the net number of sales by older homeowners who preferred to reinvest in financial assets, not to mention a greater likelihood of people using existing savings to finance work carried out on their homes. In the context of this balance between income and expenditure, changes in financial investments also depend on the increase in purchasing power, the size of which mechanically frees up new resources for financial flows. A robust econometric relationship can even be identified for financial investments measured in terms of surpluses over a long-term trend, which is positively related to the rise in purchasing power, and negatively related to both the change in outstanding housing credit and the 10-year government bond (OAT, or Obligation Assimilable du Trésor), the latter being considered a proxy for mortgage rates.

Early signs of a shakeup in asset allocation decisions?

The approach to financial flows adopted by BPCE L’Observatoire consists in assessing the net effort of investing in financial assets (sight deposits, passbook savings accounts, home savings schemes, term accounts, collective investment schemes, life insurance, listed securities, etc.), excluding the capitalization of interest and stock market valuation. These ‘excesses,’ the balance of payments and redemptions on each medium, which had suffered a major collapse of more than 50% since 2022, appeared to enjoy a sharp aggregate rebound from January to February 2025 (+7 billion euros vs. +0.4 billion euros in 2024) while, however, still remaining lower than the 2018-2019 average over the same 2-month period (9.5 billion euros), chiefly owing to the modest revival in the distribution of mortgage loans.

Unlike in 2024, and despite a more pronounced easing of portfolio rebalancing, we are witnessing the beginnings of a major shift in the reallocation of financial investments in favor of life insurance and demand deposit accounts at the expense of term accounts and, to a lesser degree, regulated savings accounts. This is due to the fall in regulated rates (both actual and anticipated from January 2025), the steepening of the yield curve, and disinflation. New fund inflows have chiefly been driven by long-term investments such as life insurance (+10.3 billion euros), with the majority coming from unit-linked products (+9.7 billion euros in unit-linked products). Euro-denominated funds also seem less impacted by the weakness of real returns, which explains the reduction in euro and unit-linked disbursements. In February 2025, contributions (+17 billion euros, slightly less than in January) and net inflows (+5.8 billion euros, including 4.6 billion euros in unit-linked products) in life insurance even reached a level not seen since December 2010 in seasonally-adjusted terms. Assets under management now exceed 2,000 billion euros. On an aggregate basis from January to February 2025, sight deposits seem to be signaling a shift in trend (+1 billion euros, vs. -10 billion euros in 2024), as well as Livret B passbook savings accounts (+0.9 billion euros vs. -6.5 billion euros in 2024), which are not restricted by a deposit ceiling and can earn higher rates of interest under certain conditions and for a certain period of time.

In contrast, Livret A passbook savings accounts, other regulated passbook savings accounts and, above all, term accounts (-1.9 billion euros, compared with +10.8 billion euros in 2024) have clearly suffered from the decline in regulated rates, the fall in key rates since mid-2024 and, consequently, the decline in yields on futures contracts. Outflows from home savings schemes, penalized since 2018 by taxation and low yields, have slowed.

A savings effort on a par with capital accumulation has contributed to a fivefold growth in household financial wealth in the space of 34 years

Setting aside cyclical effects, what conclusions can we draw in 2024 about changes in French households’ financial assets over the past 34 years, particularly by analyzing the portion attributable to capital gains and the share resulting specifically from genuine annual surplus saving? If unlisted equities are excluded, the stock of financial assets has grown nearly fivefold (x4.9) in the space of 34 years (from 902.6 billion euros in 1990 to 4,434.5 billion euros in 2024), whereas inflation has only increased by a factor of 1.8. Expressed as a ratio to gross disposable income, financial wealth has been multiplied by a factor of 1.7, rising from 1.4 times income in 1990 to 2.4 times income in 2024.

Excess saving contributed almost half (47%) to the 4.9-fold increase in financial assets, slightly less than the mechanical capitalization from interest and stock market gains (53%). The structure of financial wealth also changed markedly between 1990 and 2024. Life insurance now accounts for 43.5% of the total, a share as large as that of on-balance sheet savings (41.3%) in 2024. Meanwhile, securities have suffered a continuous decline, falling to 15.3% in 2024 from 36.2% in 1990, while sight deposits, term accounts, and regulated savings accounts have returned to a level virtually matching that enjoyed in 1990.

What is the status of Livret A passbook savings accounts and life insurance, particularly for the 30-49 age group?

How will the February 1^st, 2025 reduction in regulated interest rates affect investments?

On February 1^st, 2025, the rate of interest paid on Livret A passbook savings accounts (3% in January) fell to 2.4% and the rate earned on the Livret d’épargne populaire (LEP or ‘Popular Savings passbook savings account’), which stood at 4% in January, was cut to 3.5%. The overall effect on total investments is neutral, contrary to commonly held beliefs, since a decrease in regulated rates generally only leads to portfolio reallocations.

The typically satisfactory modeling allows us to track the impacts: a negative effect – reduced inflows – on the LEP, Livret A, the sustainable development and solidarity-based passbook savings account (LDDS), and term accounts, and a positive effect on sight deposits, life insurance, and, to a lesser extent, money-market collective investment schemes, general passbook savings accounts, and home savings schemes. Notably, the effects are substantial for sight deposits (+9.6 billion euros), life insurance (+8 billion euros), and term accounts (-9.6 billion euros). A 50-basis point decrease in the LEP rate would likely have a negative impact of 2.2 billion euros, with funds mainly coming from the Livret A, and possibly from sight deposits. A 60-basis point reduction in the Livret A rate would have a negative impact of 9 billion euros on the Livret A, mitigated by a favorable inflow (+1.8 billion euros) from LEP withdrawals redirected to the Livret A. What is more, the competition for bank liquidity seen in 2023 and 2024 has reversed the previously observed sensitivity impacts in econometric estimates for these two products (Livret B passbook savings accounts and term accounts), irrespective of whether the Livret A rate rises or falls.

The consequences in terms of investment reallocations could therefore be especially marked, as the impact tends to be much stronger when the Livret A rate is cut than when it is increased, especially below the psychological remuneration threshold of 3%, and even more so as it approaches 2%. This likely reflects the ECB’s target for acceptable inflation.

Existence of psychological thresholds for interest rates paid on Livret A and Life Insurance

Indeed, as measured by the BPCE-Audirep survey asking the French at what rate they would be encouraged to transfer currently unused funds from their current accounts to a Livret A, the median threshold has remained stable between 2.5% and 3% since 2019. This confirms observations made over a decade ago, which already identified 3% as a sensitivity threshold for household portfolio reallocations. The 2025 survey continues to highlight a major symbolic threshold at 3%, one likely to spur renewed portfolio shifts. This effect intensifies when the threshold falls below 2% (down to 1.8%): 45% of account holders would reduce their contributions or transfer funds to other products (+19 points versus a drop to 2.4%).

At the same time, the tipping point for switching to euro-denominated life insurance funds (as opposed to unit-linked funds) is also around 3.5% (for 68% of holders, it is below 4%). While there was a slight increase in interest in term accounts in November 2024, this declined in the February 2025 survey, including among high-net-worth individuals: 32% opened or considered opening a term account in the past six months (down from 35% in November 2024). For affluent individuals, this figure stands at 42% (down from 46% in November 2024).

30-49 year-olds: new fears and aspirations in an environment characterized by uncertainty

The 30–49 age group stands out for several attitudes, behaviors, and opinions in this changing environment. They appear more anxious, especially regarding a possible tax increase. They save with specific projects in mind but their main worries relate to retirement, which explains why they are increasingly turning to life insurance.

Their inclination to save is on the rise (+6 points from June 2024 to February 2025); they have saved more in the last six months (+11 points from November 2024 to February 2025) and are more likely to plan to save over the next six months (+10 points from June 2024 to February 2025). Their purchasing power is tending to improve (+5 points from February 2024 to February 2025), and saving for retirement is becoming much more of a priority (+9 points since June 2024). Their outlook for the future is also improving (+5 points from June 2024 to February 2025), and their economic and financial situation over the last six months has been trending better since November 2023 (stable or improving, +3 points). There is a slight increase in concern over the value of long-term investments (+3 points from November 2024 to February 2025), after a general decline since February 2024, and an increase in those who believe now is a good time to invest in the stock market (+4 points from November 2024 to February 2025).

A paradox observed before the recent stock market crisis

Before the stock market crash and the statements made by Donald Trump, a distinct revival of interest in stock market investments among households had been noted since June 2024: for affluent households, the proportion considering it a “good time to invest in the stock market” rose from 17% to 29% between June 2024 and February 2025, with a general upward trend among the French population as a whole (+4 points since June 2024).

A potentially major shift in investment choices in 2025?

Investment volumes are still modest in comparison to precautionary savings

Beyond geopolitical risks, the French economic environment is now being destabilized by the growing unpredictability of U.S. policy and the challenge to free trade, as illustrated by President Trump’s successive tariff hikes (some of which were then postponed for 90 days, except for China). The emergence of a trade war, with potentially recessionary consequences (shrinking global trade, reduced growth, and a short-term spike in inflation, especially in the United States), has replaced, as the main source of uncertainty, the urgency of reducing France’s public deficit after the budget vote, legislative elections, and the dissolution of the National Assembly in June 2024. This uncertainty is fueling anxiety, which can only lead to wait-and-see behavior (in terms of consumption and investment), or even mistrust. Fundamentally, these events are part of the race for industrial and technological supremacy between the United States and China, while the eurozone is only beginning an insufficient reindustrialization. This fog of uncertainty makes it more difficult to make forecasts for France, even in 2025. Indeed, if the measures initially announced by President Trump were to be maintained, French GDP, which would be affected as early as the second half of 2025, could stagnate or even decline, depending on the scale of retaliatory measures adopted and the extent of contagion effects.

The proposed baseline scenario, which is slightly more optimistic and the subject of broad consensus, assumes that GDP will grow by just under 0.6% in 2025, compared to 1.1% in 2024, as business activity is no longer buoyed up by the Olympic & Paralympic Games Paris 2024. Inflation, which central banks have managed to curb without triggering a recession, is expected to average less than 1.3% in 2025, down from 2% in 2024. The household savings rate should remain exceptionally high in 2025, declining only moderately to 17.9% from 18.2% in 2024. This is expected to limit household consumption despite lower inflation, thereby putting negative pressure on growth. In addition, if the forecasts are correct, the 10-year government bond (OAT) will bear a higher risk premium than in the past, despite continued cuts in ECB key interest rates, with the deposit facility rate reaching 2% as early as June. The average annual yield is expected to be around 3.35% in 2025, up from 3.0% in 2024. Regulated savings rates are expected to fall again on August 1, with consensus forecasts putting them at around 2% for the Livret A passbook savings account, 2.5% for the LEP, and 1.25% for the home savings account (CEL). The yield curve slope is then expected to steepen again.

In such an environment, despite the persistence of precautionary savings behavior, household financial investment volumes in 2025 are expected to remain virtually flat, with net inflows hovering at around 35.2 billion euros (compared with 34.8 billion euros in 2024). This would chiefly be attributable to stagnant purchasing power, increasing unemployment, and a still too modest rebound in mortgage lending, with long-term rates remaining high.

A net rebound in sight deposits, a revival of life insurance, and the end of the boom enjoyed by term accounts?

2025 may see a marked rebound in sight deposits, a vigorous revival of life insurance – still largely driven by unit-linked products (UC) – and the end of the boom enjoyed by term accounts, in a context of normalization of portfolio reallocations, a trend that began in 2024 after record shifts observed in 2023. Life insurance (+45 billion euros, still less than the 51 billion euros recorded in 2009–2010), drawing funds away from regulated savings products and term accounts, is expected to benefit from falling regulated rates, disinflation, a steeper yield curve, the still only partial rebalancing between euro funds and UC products, and a sharp decline in the supply effect on term accounts. Sight deposits are expected to finally see positive inflows (+19.5 billion euros), while term accounts are expected to experience outflows (–10 billion euros). Inflows into home purchase schemes are liable to continue their decline. However, if regulated rates fall too far, below the psychological threshold of 2%, this could further disrupt the structure of inflows in the second half of the year.