Home loan: Becoming a homeowner, a dream that becomes unattainable for the most humble
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Mortgage rates have been rising for several months, and with them the noose for the most humble French has tightened. Why does borrowing as a homeowner become so complicated?
As it does every quarter, the CSA Housing Credit Observatory released several numbers revealing the state of the mortgage market. With the second quarter of 2022 marked by a rise in housing interest rates, it is not surprising that the most humble households are having the greatest difficulty accessing credit. Is borrowing with a limited budget still possible? Explanations in numbers.
A delicate context for the most humble French
The current context is not favorable for borrowers who have a limited budget for a property purchase. With an annual inflation rate of +5.8% in June 2022, the purchasing power of the French in particular is suffering from the general price increase. With less leeway, the humblest of households are also hit the hardest and have greater difficulty making ends meet, putting money aside to pay off a monthly installment.
At the same time, the war in Ukraine has increased the cost of certain building materials. Wood, metals, PVC… Builders of new homes had no choice but to pass these price increases on to their own prices, with an average increase of +6.4% for the sector in the first half of 2022. To be fair with this context, three Solutions are available to future owners: borrow more, bring more personal money or make compromises in your purchase criteria (smaller area, less space, location, etc.). Only the prices for existing apartments still show a certain degree of stability or a more sensible increase.
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Fewer and fewer real estate loans are being granted to small budgets
According to Michel Mouillart, economist at the Crédit Logement CSA observatory, “households with a low contribution no longer have a place in the market”. To reach such a conclusion, this expert bases on the amount of contribution that is currently required to access the loan. Compared to the end of 2019, it is now important to use more money from personal savings: +28.8% in less than 3 years. This is changing the profile of new borrowers towards wealthier households who already have significant savings and can buy more expensive properties.
In general, for the second quarter of 2022, according to the CSA Credit Housing Observatory, “the number of loans granted has weakened year-to-date”, with a -12.5% decline in quarterly production levels halted at the end of June. It is the humblest of households that suffer the most. They are then sometimes completely excluded from access to credit. Either because the debt ratio is too high, reinforced by an interest rate increase across all maturities. Either because the loan fails to meet the attrition rate, i.e. the maximum rate at which funding can be obtained, due to a time lag between the rise in interest rates and the attrition rate.
In order to be able to continue borrowing, more and more of these households are taking out long-term mortgages. Thus, 65% of loans are taken out over a period of between 20 and 25 years, a record proportion as it has never been reached before. At the same time, home loans taken with the shortest maturities of less than 15 years are becoming rarer, with only 13.6% of new financing being granted over these maturities, again a historic number.