Written by Marion Regno,
Published on 06/14/2022
Over the past few months, the home loan environment has been juggling the terms of high rates, limiting usury rate, difficulty in obtaining credit, inflation… an unwelcome selection that worries about terms of access to property and makes it difficult to consider borrowing from banks. However, what does the fact of high interest rates impose on us? Should we be talking about an alarming increase?
Tight rise in mortgage rates
Since the end of 2021, it has become Real estate prices soaring On the lips of all credit professionals. If, until the beginning of 2022, we experience a moderate price increase, the truth is that there is an acceleration. In January 2022, it was still possible to borrow at 0.75% interest over 20 years. After six months, the best rates obtained were around 1.1%. Rapid increase of about 0.50%.
However, the Credit Log Monitor was quick to point out that this increase is “still well below the 10-year inflation rate or OAT since December 2021. Rates. This statement is supported by all financial institutions, notably the Banque de France, which invites the French to put the consequences of that into account. controlled hypertrophy. The rates applied until then remained historically low!
As a reminder, at the end of 2011, loan rates only fluctuated between 3.5 and 4%. It has only been a few years since prices have been trading at exceptionally low values. François Villeroy de Gallo, Governor of the Bank of France, goes better by emphasizing that the values from 2 to 3% offered for mortgage loans are “more normal financing terms. It must therefore be admitted that the exceptional nature of prices lies in the old rates, and not the new ones, which revert to the usual values where it has always been possible to self-finance and to acquire desirable property. In short, it is always possible to borrow!
History of real estate prices over the past ten years
Binding Financing Terms
As you understand, high mortgage rates are not an obstacle to accessing bank financing. However, it is actually possible to notice difficulties in obtaining credit. In question, these are the rules and restrictions surrounding a mortgage.
New HCSF Standards
To combat cases of over-indebtedness, the Supreme Council for Financial Stability has tightened restrictions on granting loans. Since January 1, 2022, it is no longer possible to borrow for more than 25 years (excluding construction projects) and at a rate of more than 35% (includes insurance); If there are exceptions, only 20% of funded files are allowed. These directives must be strictly enforced by the banks, at the risk of exposing themselves to severe penalties from the state. Security that keeps the most fragile personal files out of credit.
wear rate limit
added to this wear rate problem. This value, which the Bank of France calculates every quarter, corresponds to the interest rate that banks cannot exceed. For example, in this quarter, it is not possible for lenders to offer a real estate rate higher than 2.43% over a 15-year period.
The usury rate and the applicable average rates charged by credit institutions and finance companies (%)
|category||Actual average price charged with
First Quarter 2022
|wear rate applicable to
April 1, 2022
|real estate loans
Business loans and mortgages over 75,000 euros (2)
|Fixed rate loans for less than 10 years||1.88||2.51|
|Fixed rate loans from 10 years to less than 20 years||1.82||2.43|
|Fixed interest loans for 20 years or more||1.80||2.40|
|Variable Rate Loans||1.74||2.32|
(2) Definition – real estate loans: loans made to families within the scope of application of 1st degree of Article L. 313-1 of the Consumer Code or in an amount greater than 75,000 euros intended for financing, for residential premises or for professional and residential use, expenditures related to their repair, improvement or maintenance
Although this makes it possible to prevent banks from charging exorbitant rates, the interest rate logic mishandles the bank loan as it is estimated according to an average obtained (increased by a third) thanks to the rates charged in the previous semester. Thus, in the event of rapid rise in interest rates, the rate of usury becomes obsolete and forms a wall against which the rates of inflation.
Loi Lemoine: The Rise of Loan Insurance
The tight credit situation becomes more complex as the borrower’s insurance rate also flares up. This time, we should point the finger at a release, since June 1, 2022, of Lemoine’s Law for new insurance contracts. Faced with the removal of the medical questionnaire for some credits, insurers are trying to arm themselves against blind risk while promoting excessive rates. Between the inflation of loan and insurance rates, the usury rate limit and credit restrictions, the difficulty lies in finding a point of balance between all these concepts and having the APR (Annual Cost Percentage Rate) in the standard.
Solutions to improve credit
Neither deaf nor blind, the government hears the speech of the banks regarding the issues it faces. In this particular context, the Minister of Economy, Bruno Le Maire, asserts that solutions are being considered to overcome the rate of erosion limit and help the affected traits to obtain credit. Thus, the account can be redesigned.
As for the borrower’s insurance rates that have risen significantly, Representative Patricia Lemoine ensures that the game of competition between various insurance companies will make it possible to return to the correct and advantageous rates.
Borrowing is always possible!
Despite all the turmoil rocking the mortgage environment, it must be recognizedIt is possible to borrow. Of course, it can be more difficult, but it is not impossible. In short, the financing terms are no longer the same. For these purposes, here are the points you should focus your attention on to model a successful strategy.
Your real estate project matures
Banks focus on many elements in the study of the financing profile. In addition to the project, the borrower’s profile is studied with a magnifying glass by the banking analyst, and in the first place his information to demonstrate the solidity of the financing profile:
- bank account management : It is essential to be able to justify the proper and stable management of one’s bank accounts and savings. Any accidents or overdrafts for less than 3 to 4 months that could be detrimental to getting a loan;
- pregnancy jump : corresponds to the difference that will exist between the old monthly payments and the news due for the purchase of housing. The analyst verifies that the load jump is not too large if it is higher and that this will not put the borrower in financial difficulty;
- Potential development of resources : If the borrower’s profile is evolving and income is likely to increase over time, this is an additional element to reassure the lending institution and ensure long-term repayment of credit.
Make a big contribution
Banks also tend to finance a real estate project with the contribution of additional costs (Notary fees, management fees, escrow fees, etc.) with an amount covering part of the purchase of the property. Generally, banks claim 20% of the contribution plus bear the costs excluding the acquisition of the property. The contribution of this amount is able to reassure the lenders and greatly reduces debt ratiolimited to 35%, insurance included, as a reminder.
Increase your purchasing power
In order to facilitate obtaining new credit and free up more borrowing power, credit consolidation Or credit facility is on the rise! If you have multiple loans (real estate, depreciation, car, etc.), it may be appropriate to use credit consolidation to combine all of your loans into one and honor only one monthly payment less than your total repayments. Your remaining living will be increased tenfold and your debts will be reduced in order to consider new projects and better control your budget.
Regarding loan facilityIt can be interesting to settle all your debts by determining the total amount of your monthly payments.
Get your loan through a real estate broker
As you understand, the strategy for accessing credit has changed in recent months. Today, throwing oneself into obtaining financing is more than difficult and Accompanying the real estate broker is a necessity. In addition to his ability to negotiate the best rate, he provides informed advice in order to obtain the best financing terms and has excellent relationships with lending institutions. Lots of assets that make it the primary ally of the mortgage.