They are still low… but they are going up. Since the start of the year, mortgage rates have been rising. While in April 2021, we borrowed on average, all durations combined, at 1.07% (excluding insurance), the average rate reached 1.27% a year later, according to the CSA Housing Credit Observatory. With increases in scales that vary according to the banks.
“Since January 2022, banking establishments have increased their rate schedule between 0.20 point and 0.75 point, depending on their production targets”points out Sandrine Allonier, spokesperson for the broker VousFinancer. “For a couple of first-time buyers with 3,500 euros in total income and 10% contribution, the rate can thus go today from 1.42% to 2.05% over twenty years”she says.
First victims of these shocks on rates: first-time buyers and low-income households. “We have seen here since the beginning of the year a drop of 5% to 7% in buyers under 35 and employees and workers”deplores Yann Jéhanno, president of the network of real estate agencies Laforêt.
“Their debt ratio exceeds the ceiling of 35%, they are struggling to build up a contribution and to follow the rise in rates”, he points out. Since 1er January 2022, the High Council for Financial Stability (HCSF) requires banks, in the general case, not to lend to households for more than twenty-five years and to ensure that the borrower’s debt ratio does not not exceed 35% of its income.
Wear rate exceeded
In addition to the rise in interest rates, the tightening of loan conditions, and above all the high level of property prices, there is, for these borrowers, the low level of usury, i.e. maximum rates at which banks are allowed to lend. For loans of twenty years and over, the wear rate has only been 2.40% since the beginning of April.
“With rising rates, many of projects from first-time buyers and low-income households exceed the wear rate at the time of the calculations”notes Olivier Lendrevie, president of the broker Cafpi, stating that he estimates that in his network, in May, “the order of magnitude for files refused because of the attrition rate is one out of four, but it is difficult to specify because sometimes we do not present files to the bank as we know they will be refused for this reason.
To understand, you should know that these wear rates are calculated each quarter by the Banque de France, for the different categories of credit, on the basis of the average rates charged by lenders the previous quarter, increased by a third. (It is the annual percentage rate of charge – APR – which counts, which includes all the costs linked to the credit). They are therefore always one quarter behind the rates applied, which can be a concern in periods of rising rates.
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