The conditions for obtaining a mortgage have become much tougher since the beginning of the year. In its Real Estate Credit Observatory presented on Tuesday, the broker Meilleurtaux highlights three examples of files no longer passing through the banks, due to the rate of wear.
These are today the two main enemies of any borrower: the debt ratio and the rate of wear and tear are increasingly shattering the real estate dreams of many French households. Since January, a borrower must not go into debt more than 35% to repay his monthly mortgage payment.
According to Meilleurtaux and its Real Estate Credit Observatory, in January 2021, 71% of files were below the 35% debt limit. A year and a half later, in June 2022, only 59% of files are below the fateful 35%.
An increasingly excluding wear rate
For those who are below the 35% mark, it is still the rate of wear that can jeopardize their project. As a reminder, the usury rate is the maximum rate above which banks cannot go when offering a mortgage. This rate includes the nominal rate, the borrower’s insurance, the guarantee and any administrative fees.
Currently, for loans equal to or greater than 20 years, it is 2.57%. Too little, while mortgage rates are rising rapidly. Meilleurtaux therefore provides three examples of files blocked by the wear rate, for profiles yet able to borrow.
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Example 1: A 42-year-old couple, with a monthly net income of 3,500 euros, wants to borrow 220,000 euros over 20 years at a rate of 1.85% excluding insurance. Borrower insurance is 0.40%, with an insured rate of 100% for women and 50% for men. In this configuration, the total APR, including warranty costs, is 3.04%, or 0.47% more compared to the wear rate of 2.57%. The file will therefore be refused.
Real estate credit: are you blocked by the wear rate? Tell us!
Example 2: A 30-year-old bachelor, who earns 2,500 euros net each month, wants to borrow 150,000 euros over 25 years. The bank offers him a rate of 2% excluding insurance, to which must be added 0.27% borrower insurance, plus ancillary costs. In this case, the APR reaches 2.59%. Once again, the wear rate is exceeded. To hope to pass the file, it will be necessary to play, if possible, on the borrower’s insurance, or to hope for an effort from the bank.
Example 3: A 46-year-old couple, with a monthly net income of 8,000 euros, wants to take out a mortgage loan of 500,000 euros over 19 years. The bank offers a rate of 1.65% excluding insurance. With an insurance ratio of 100% for men and 50% for women, the borrower insurance rate is 0.30% for the first and 0.40% for the second. The total APR reached 2.67%. Once again, and despite comfortable incomes, the couple will be refused financing because of the wear rate.
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Very often, the cases therefore exceed the rate of wear and tear without even counting bank charges or brokerage fees. Proof, according to Mal Bernier, spokesman for Meilleurtaux, that the wear rate, a protective device for borrowers at the outset, has become purely and simply excluding.
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