When the elements go after households who want to get a home loan. Not only are the prices of apartments and houses increasing, but the borrowing rates follow the same curve, the usury thresholds block the worst files… and Bercy’s instruction not to lend for more than 25 years is made more and more feel.
Banks accelerated rate hikes. This observation is the Crdit Logement-CSA observatory which draws it up in its monthly barometer for the month of August, published on Tuesday 6 September. This observatory is a reference in the sector, since it is based on more than 300,000 real estate transactions each year via the Crdit Logement guarantee, on the analyzes of the economist Michel Mouillart, and the tools of the CSA institute.
However, the average rate observed in August, all durations combined, is 1.82%. It was 1.70% a month earlier, 1.52% in June… and 1.10% last February. Last October’s record low of 1.04% is clearly part of the past. These increases are visible over all durations, and the shortest loans – over 15 years – have seen their average rate double in a few months, from 0.86% at the end of 2021 to 1.71% at present.
| Duration of the loan | Average rate |
|---|---|
| ready on 15 years old | 1.71% |
| ready on 20 years | 1.85% |
| ready on 25 years | 1.96% |
Source: Crdit Logement/CSA Observatory – August 2022
save up to 70% on your borrower insurance
And yet… the rise in rates could be even faster, as recognized by this observatory: It is true that the rise in credit rates remains limited by the wear rates. Indeed, taking into account the cost of insurance and mandatory guarantees alongside administrative costs, limits credit rates, more strongly than before the summer, in order to allow the exit of an APR [taux annuel effectif global, prenant en compte le crdit et les cots annexes, NDLR] acceptable. Because the usury thresholds, the target of numerous criticisms in recent months, apply not to nominal credit rates – the loan rate, the one put forward by the bank or broker – but to APRs, insurance and warranty included. In short: borrowers with poorer records have very little margin to obtain their credit. If the costs are too high, there is a risk of blocking and therefore of refusal of the file.
Real estate credit: Bercy negotiates with banks to avoid blocking borrowers
Two-thirds of loans over 20 to 25 years
One of the techniques to pass a fair credit file goes through the lengthening of the repayment period. Borrowing over a longer period can increase the rate… but it allows you to lower the monthly payments and therefore reduce the famous debt ratio. Because banks now have to limit the number of files that exceed 35% debt: if a borrowing couple earns 3000 euros per month, the maximum monthly payment (borrower insurance included) is 1050 euros (35% of monthly income).
But the lengthening of durations is also limited: the High Council for Financial Stability (HCSF, body chaired by the Minister of Economy and Finance Bruno Le Maire) is also asking banks to limit the number of files that exceed 25 years of debt.
Real estate credit: what has changed with the entry into force of the HCSF good practices
Borrow over 25 years? Insufficient in the face of soaring real estate prices
The Crdit Logement-CSA observatory follows the evolution of loan durations and its statistics show a bottleneck. In 2015, when rates were already on the downward slope for a long time, less than 25% of loans intended for the purchase of a home exceeded 20 years of indebtedness. Then the rise in real estate prices did its work. In 2020, almost one in two loans was signed for a period of more than 20 years. To beat a record in the 2nd quarter of 2022: 65% of real estate loans are granted for more than 20 years.
Problem: as the banks cannot accept loans for more than 25 years, all the files are now condensed on the tranche going from 20 years to 25 years. In August 2022, 64.1% of applications are granted for a period of between 20 years + 1 month and 25 years. However, the observatory notes for the first time in almost a decade a slight reversal of the trend: the share of the longest loans is slowly starting to decline.
How to explain it? Long durations are no longer enough to compensate for the rise in prices. Impossible to lengthen the duration to borrow larger amounts… and therefore follow the soaring prices. In other words, in the real estate market, a blocks all floors!
Compare real estate rates