Mortgage loan: 30% of applications are rejected, contribution asked sharply up to 25%, block erosion rate as much as no contribution

Mortgage loan: 30% of applications are rejected, contribution asked sharply up to 25%, block erosion rate as much as no contribution

Roughly 30% of mortgage applications are currently rejected, according to several brokers. On the part of the banks, same note, the credit application piles grow, but the rejections are merging, and the under-contribution is more special than the relative weakness of the erosion thresholds. However, the vast majority of borrowers manage to get a mortgage proposal, which is therefore below the usury rate threshold. Thus, the main concern will not be these usury rates, whose principle it must be remembered is to protect the borrowers from a financial point of view very equitably, but the weakness of the contribution made to raise the desired funds. Consequently, potential borrowers are short of capital, with the contribution demanded by banks continuing to rise in the face of the increased risks of a downturn in the real estate market. From now on, with a contribution of at least 25%, a credit offer is proposed.

Harrow on the thresholds of wear…

According to the media, the current drawback of the real estate market, particularly for first-time buyers, is wear and tear thresholds. These usury rates, the maximum, all costs included, which banks are no longer authorized to lend. So yes, the difference between wear rates and rates charged, except for insurance, and mortgages has seldom been low, yet that’s not an immediate concern.

interest rate for mortgages

Interest rates for mortgages © FranceTransactions.com/stock.adobe.com
Reference Prices Benefits
Wear rate per person (applied in Q3 2022) (1)
Maximum mortgage rate (more than 75,000 euros borrowed)
Credit erosion rate for less than 10 years 2.60%
Credit erosion rate for less than 20 years 2.60%
Credit erosion rate for 20 years or more 2.57%
carryover loan erosion rate 2.99%
Variable credit erosion rate 2.45%

(1) Pricing source: Banque de France

A blatant lack of contribution

The problem lies in assessing the risks in the real estate market. The risk of loan default increases with the onset of a recession (technical or not, macroeconomic indicates a sharp slowdown in economic activity). However, for banks, what matters is financial compensation for risk. In this context, it is clear that what is important is the contribution of the candidate borrower. By reducing the borrowed capital, the assessed risk is reduced accordingly.

Thus, borrowing is always largely possible, as long as the contribution made up to a significant level. The usury rates are only enforceable on candidate borrowers whose profiles are considered risky.

borrowed amount Average personal contribution required
€150,000 €37,500
€200,000 €50,000
250,000 euros 62.500 EUR
300,000 euros €75,000
350,000 EUR 87.500 euros
400,000 euros 100,000 euros
450,000 EUR 112.500 EUR
€500,000 €125,000

Precautionary saving capacity

Other criteria are calculated for bankers such as post-project savings. This helps see if borrowers can handle unexpected expenses. Professional status, and in particular the seniority of borrowers, is also an important criterion.

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