Faced with the difficulties encountered by certain borrowers, particularly younger ones, two regional banks now offer loans over 30 years. A solution at a non-negligible cost.
Faced with the contraction in the real estate loan market, certain banking establishments are looking for solutions. Thus, two regional banks have, according to a press release from the broker Vousfinancer, chosen to offer certain customers loans over 30 years, a first in more than ten years.
According to information from Parisian, these are the Normandie and Le-de-France Savings Banks. As a reminder, if the maximum duration of a real estate loan is set at 25 years (27 years in certain) cases, the rules dictated by the High Financial Stability Council (HCSF) authorize banking establishments derogate from the criteria for 20% of their production.
A low differential between 25 and 30 years old
The idea is to have only a differential of 0.10% between the rate scale over 25 years and that of loans over 30 years, to prevent the benefit of the extension from being canceled out by the cost of the creditdeciphers Alexandre Castagnon, marketing director of the Caisse d’pargne le-de-France, with the Parisian. For the moment, these loan periods are reserved young people under 35 or first-time buyers.
Real estate credit: are first-time buyers the big losers from rising rates?
In the current context of still high prices and rates of more than 4%, the extension of the duration of credits is a good measure for first-time buyers which should allow some to be able to borrow again, judges Sandrine Allonier, spokesperson for Finance you. Indeed, for a credit of 250,000 euros, the extension of the duration of 5 years leads to a reduction in the monthly payment of more than 110 euros and, for a couple with 4000 euros of income, a reduction in the debt rate of 3 points, which can make a difference! Extending the duration of the loan can therefore be a real lever for purchasing, provided that the rate difference between 25 and 30 years is low so as not to increase the cost of credit too much.
An extension of the loan term with perverse effects
Because the lengthening of the duration necessarily increases the cost of credit. According to the example presented by Vousfinancer, the borrower over 30 years will have to pay an additional 40,000 euros (excluding insurance) compared to a borrower taking out a 25-year loan.
Borrowing over 30 years can be a good solution for second-time buyers who are buying a property in which they will stay. I don’t think this is the best solution for first-time buyers, because not only is credit more expensive, but the amortized capital is also lower in the event of resale in the first yearswhich is often the case for first-time buyers, judges Mal Bernier, director of communications for the broker Meilleurtaux.
Finally, the reappearance of these long-term loans could also have a negative impact on the correction of real estate prices. The specialist Henry Buzy-Cazaux thus judges in a column on Capital that if the banks confirm that current prices can be absorbed for part of the demand by the extension of debt periods, they compromise the fall in prices residential real estate assets.