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by the Meilleurtaux editorial team
The sharp and rapid rise in mortgage rates between December 2021 and May 2023 considerably restricted households’ borrowing capacity. This situation adds to the current difficulties of the real estate market and could worsen during the year.
In December 2021, the average 20-year interest rate was around 1%. In May 2023, it had risen to 3.25%, forcing many households to postpone their real estate purchase plans or to revise their ambitions downwards.
With less favorable rates, household borrowing capacity has fallen by around -20% on average over the past 18 months. However, this decrease varies according to the characteristics of each household.
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First-time buyers hard hit
ImportantIt is mainly the most modest households that are the most affected. Between December 2021 and May 2023, the borrowing capacity over 20 years increased from 158,000 to 128,000 euros for a first-time buyer with 2,200 euros in monthly income.
A similar observation applies to a couple in their thirties with three children and 6,000 euros in monthly income. Their borrowing capacity over 20 years fell from 437,000 euros to 354,000 euros.
Only a few well-to-do households fare a little better. For example, a 50-year-old with monthly income of 8,000 euros saw his borrowing capacity over 20 years fall to 487,000 euros, compared to 591,000 euros in December 2021.
Additional difficulties
This decline in real estate purchasing power is only the tip of the iceberg. Households also face challenges related to a debt ratio capped at 35% of income over 25 yearswhich hinders many files.
In addition, the real estate market faces other obstacles, such asa shortage of new housing, a decrease in construction in progress and problems related to energy renovation requirements.
In order to facilitate access to property, it would take an increase in income combined with the fall in property prices to compensate for inflation.
- The rise in mortgage rates between December 2021 and May 2023 reduced household borrowing capacity by 20%.
- Modest first-time buyers were the most affected.
- This loss of real estate purchasing power comes on top of other difficulties such as the shortage of new housing and energy renovation requirements.
- An increase in household incomes combined with a fall in house prices is necessary to facilitate home ownership.
2023-06-03 19:03:22
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