While property prices are slowly starting to fall in France, some are wondering about loan terms. What is the level of interest rates? The revision of usury rates to 1and January 2023 facilitate access to credit? Already facing the scissors effect from mid-2022, will French households be able to realize their real estate project in early 2023?
A mixed housing budget for 2022
The volume of real estate transactions in the old sector will remain at a high level in 2022, with over 1 million sales according to the forecasts of the notaries of France. 2021 was a record year with 1.2 million old homes sold, a performance facilitated by the low borrowing rates. For the record, in the fall of 2021, the 20-year average rate was displayed about 1% (ori borrower insurance and warranty cost).
Considering the sharp increase in interest rates since March 2022, following the war in Ukraine, last year’s figures are impressive. The dynamism was concentrated in the first half of the year, subsequently the increase in interest rates slowed down demand. But what will mark the year 2022 is the brake driven by wear rates, totally in disagreement with the progressive increase in market rates. Already last June, brokers noticed a sharp increase in mortgage loan denials due to block wearand not for reasons of insolvency of the folders.
There was even more excluded in December 2022 due to wear rate. The 1and January 2023 was therefore anxiously awaited to find out whether the conditions will allow for borrowing again. The two combined factors of a rise in borrowing rates and a review of usury once again close access to credit ?
Increased the dropout rate to 1and January 2023
The applicable dropout rates for the first trimester are as follows:
|
Real estate loans |
Usury rate in the fourth quarter of 2022 |
Usury rate in the first quarter of 2023 |
|
Fixed-rate loans with a term of less than 10 years |
3.03% |
3.41% |
|
Fixed rate loans with terms between 10 years and less than 20 years |
3.03% |
3.53% |
|
Fixed-rate loans with a term of more than 20 years |
3.05% |
3.57% |
|
Variable rate loans |
2.92% |
3.35% |
|
Bridge loans |
3.40% |
3.76% |
He will do it easier access to the mortgage thanks to the increase in usury rates in January 2023 ? The question is asked at the beginning of each quarter, when the statutory maximum rates are reviewed. The window of opportunity quickly closed last October against the constant increase in lending rates.
Again, the room for maneuver is likely to be very limited. The increase in the usury rate will not revive the housing market, because the problem remains until the retail banks can collect no profitability on new loans.
Banks define their tariff plans on the basis of refinancing rate of the European Central Bank (2.50%), but also of theOATS 10 years, on which they apply their margin taking into account the risk. France is now on a 10-year loan deal above 3%, the first in ten years. It is therefore logical for retail banks to increase their scales, but the margin is narrow, because it is blocked by the regulation of usury.
Mortgage rates are currently at between 2.50% and 3% on the classic 20-year termand over 3% in 25 years, which is, it should be recalled, the maximum regulatory duration.
Access to housing credit still hampered in January 2023
In the coming weeks, interest rates will remain positioned above 3%a forecast made by brokers as early as October 2022. With a usury rate limited to 3.57% for 3 three monthsmany borrowing families will meet again make a refusalwhy their APR (Global Effective Annual Rate) will exceed the legal threshold, even if they are perfectly solvent.
To obscure the picture, we must expect a new decision to raise key ECB rates during the first quarter of 2023, in order to fight inflation in the euro area. Between the regulatory deadlock caused by usury and the pressure exerted on banks to shelve existing risks in anticipation of a recession, the inertia of the real estate market is satisfied, some large banks have leaked that they will not reopen the credit tap by the second quarter of 2023.
Will 2023 reproduce the 2022 scenario? Without a drop in inflation and refinancing rates, accessing mortgage credit will remain difficult knowing thisno usury reform looms in 2023. It’s hard to fathom theBoF stubbornness reject any modification of the wear calculation. The institute appears off the ground, while home mortgage production data shows a 37% drop in one year in a rolling quarter in the period September/November 2022.
