CASE. Real estate loans: why households are getting fewer and fewer loans
Since the beginning of the year, rising interest rates in connection with low wear and tear have led to an increase in the number of applications for building finance being rejected. One in two applications would be rejected due to the turnover rate. More and more households are excluded from access to property.
Is a mortgage a luxury in 2022? With rising interest rates on loans and a rate of usury that experts consider too low, it is becoming increasingly difficult for households to obtain a loan from a bank. According to the broker, the main question is: far too little wear. This threshold of 2.57% for a 20-year fixed-rate loan, set on July 1st, aims to avoid excessive household debt.
“It is ostracizing for a whole section of the population. Solid files that would have been accepted just a few months ago are now being rejected,” says Sandrine Allonier, study director at real estate loan broker Vousfinancer. Figures from an Opinion System survey commissioned by the French Association of Bancassurance Intermediaries (Afib) confirm this: almost every second mortgage application (45%) is rejected due to the attrition rate. That is, the maximum legal interest rate that credit institutions are allowed to charge.
According to experts, this legal upper limit set by the Banque de France could lead to a possible blockage of the market. Véronique Bédague, Managing Director of Nexity, explains that “the combination of the attrition rate and rising rates is making some first-time buyers, particularly the most humble and young, less solvent”. And with good reason: a majority of those loan applications would be rejected for a primary residence (71%) and just over half of those mortgage loan rejections linked to attrition rate are in the 30-55 age group (51%), according to the survey. A “scissors effect” would hit borrowers caught between rising lending rates and too low an attrition rate. Result: A large number of still sound borrower files are rejected. Almost €22 billion in loans (including renegotiations) were granted to households in July, according to an estimate by the Banque de France. That is 5 billion euros less than in May and one billion less than in June. On the subject, the French Banking Federation (FBF) has indicated that it is “watchful for the indicators that could point to mortgage lending tensions” while warning that the attrition rate “should not become a mechanism to deprive households of financing.” to exclude their solvent projects”.
“Protect borrowing households”
While many professionals are pushing for a change in the way the usury rate is calculated, the Department for Economy and Finance told Les Echos that “the minister could make adjustments, on the recommendation of the governor of the Banque de France, if usury proves to be an impediment.” for access to credit”.
Our colleagues also point out that the government wants to encourage banks to slow interest rate hikes, which are more than remarkable in 2022. For its part, the Banque de France does not listen with the same ear when it comes to interest rate.wear, recalling that it was created “to protect borrowing households”.
Borrowers, brokers, bankers… Everyone is now waiting for October 1st with a probable usury rate hike for the last quarter of 2022. But even allowing for estimates of a 0.20-0.40 point hike, the rate is The true heart of all passions would still be too low to “unlock the market,” says an industry professional.