A housing complex in Casa Anfa. Credit: Mustapha Razi / Le Desk
The sharp rise in the key rate in recent months will increase the credit bill for some homeowners. But, depending on the contracts and the banks, the holders of variable rate mortgages will not be exposed in the same way to the increase in the cost of money.
With the rise in interest rates, some owners will see the monthly payment of their mortgage take the lift. About 10% of housing loan production is at variable rates, estimates Afdal.mabenchmark comparator simulator for housing loans in Morocco.
The fall in interest rates following that of the key rate over the past two years (it fell from 2.25% in 2019 to 1.5% in 2020) and competition between banks have pushed more borrowers to opt for this solution. The weight of variable-rate loans in overall outstandings thus increased by 3 points, rising from 5% in 2019 to 8% in 2021.
Today, to counter excessive inflation, Bank Al-Maghrib raised its key rate by 1.5 points between September 2022 and March 2023 (1.5% to 3%). This will make credit more expensive and increase the bill for those who hold variable rate loans. However, the latter will not be exposed in the same way to the rise in the cost of money. Depending on the banks and contracts, the impact will be differentiated.
Some banks offer capped rate contracts that allow you to know the maximum upward or downward variations in the interest rate. Customers control their risk and have visibility on possible changes in their monthly payments over the term of the loan.
If a customer benefits from an initial rate of 3.7%, for example, with a maximum upward variation of 0.5 points, the discounted interest rate on each anniversary date will not exceed 4.2%. In general, capped rate contracts are most often offered during promotions and for well-defined profiles.
In other floating rate contracts, the current rise in interest rates will be felt most strongly by clients, as the benchmark index has risen significantly. The bill is therefore likely to be heavy with increases of up to 1 percentage point according to professionals.
Fixed or variable rate?
Over short periods and in a stable economic period, variable rates remain an attractive option according to professionals. The initial rate is more attractive than fixed rates. On the other hand, the subscriber has no idea of the overall cost of credit, except in the case of a capped variable rate contract.
A local bank currently offers a variable starting rate of 4% with a ceiling of 5% and a floor of 3.5%. Today, fixed rates hover around 5%. Loans with fixed rates provide security to subscribers insofar as the conditions remain unchanged over the entire duration of the loan.
This also means that in the event of a drop in reference rates, holders of fixed-rate loans will not be able to benefit from them. Once during the life of the loan, they can switch to a variable rate and vice versa.
