La conjonction de plusieurs facteurs, dont la hausse des taux, explique l

Real estate: the number of bad loans, the most modest loans removed from the market

Slowly but surely, the mortgage market has deteriorated over the months. According to figures from the Crédit Logement/CSA observatory, production of credit for home purchases showed an additional decline in the second quarter, highlighting the trend observed in the first quarter. On an annual basis, the volume of loans granted decreased by 12.5% ​​between April and June, while the number of loans decreased by 9%.

Over the half-year, the decline in production was 5.6% in value and 7.3% in volume, with the old building market affected much more than the new building market. Another note: The solvency index, as calculated by Crédit Logement, a banking organization that manages half of collateral on mortgage loans, shows signs of weakness; The increase in the average down payment only partially offset the increase in the average loan amount (+8% in the first half) at an additionally higher cost.

However, ACPR has just indicated that risks remain well controlled, thanks to a grant policy that is based on household solvency (not on property value) and is mostly awarded at a fixed rate (and protected by insurance and collateral).

Accelerated contraction in production

“We have a market that tends to go into a pullback mode”, summarizes economist Michel Moylart, university professor and scientific advisor to the observatory. According to Crédit Logement, the outlook is hardly encouraging in the second half. According to the economic scenario of the Bank of France last June, which expects an average credit rate of 1.55% in 2022 (ie an average rate of 1.9% at the end of the year), credit production (acceptable to supply) could fall by 15% This year to 170 billion euros, compared to 200 billion euros in 2021, that is, a return to production levels for 2018 and 2020.

It would be easy to attribute the decline in production to the rise in mortgage rates. But let’s be careful because rates have finally gone up weak With regard to inflation or a high rate of OAT”, Michel Muellert warns. According to the observatory, the average price (excluding insurance) reached 1.4% in the second quarter, compared to 1.12% in the previous quarter. This rate in June averaged 1.52%, which confirms a steady acceleration since last March. This increase relates in a relatively uniform manner to all types of customers and all credit periods.

That average rate could be as high as 1.9% at the end of the year, or even 2.25% in a more stringent back-to-school scenario in terms of inflation. Mortgage brokers in July noticed more and more rates offered by more than 2%! The bank now offers one rate regardless of the borrower’s profile, income or loan term: 2.10% over 15, 20 or 25 years! “,” Reports on the example of the broker VousFinancer.

Collapsed margins

Since last December, average prices, according to Crédit Logement, have risen by 42 basis points, but that’s four times lower than inflation, and even five times less than the ten-year OAT, which is a benchmark for mortgage credit. “This rate increase is certainly rapid but it falls short of the brutality of the increase one would expect when looking at inflation or market rates,” Michel Mollart notes. It is clear that the banks did not fully pass the high market prices, and “We have never seen credit ratings so low compared to inflation”, confirms the economist. In fact, mortgage credit still displays negative real interest rates.

It has even become a concern for ACPR, which is always keen to avoid unprofitable banking activities. Because, right now, banks are clearly selling mortgages at a loss. According to the quarterly survey of the European Central Bank (ECB), French banks’ margins collapsed in the second quarter, turning negative by 67 basis points, when they were already in the red (-25 basis points) in the first three months.

This is even an exception in Europe where average margins on Eurozone mortgages stabilized from one quarter to the next (-10 basis points all similar, versus -9 basis points in the first quarter), suggesting that the greater ability of non-French European banks to Support the high costs of refinancing. France’s relatively low profit rate (including insurance and management fees) – which was raised on July 1 to 2.57% for a 20-year loan, up from 2.4% previously – no doubt partially explains this moderation on the part of banks.

At the same time, the term of loans continues to lengthen, and loans over 25 years account for more than half of production (51% and 65% for loans over 20 years). In June, the average loan term is now more than 240 months (20 years), so the lengthening of the term fully compensates for the increase in interest rates. It is also a result of recommendations from the High Council for Financial Stability (HCSF), which set a maximum household effort rate to borrow at 35% (excluding exemptions for first-time buyers).

Exclusion of part of customers from the market

For Michel Moellert, the decline in production finds another explanation. “Production is declining because families are no longer able to enter the market”, he thinks. In fact, the nature of the market has radically changed. “Customers who present themselves in the market today have a higher income”the expert notes.

According to the observatory, average income rose by 4.7% between 2021 and 2022, an increase far greater than purchasing power. At the same time, borrowers make larger real estate transactions, which explains the almost 10% increase in the average loan amount. “We have rarely seen such a development.”confirms Michel Muellert.

With real estate prices not weakening (yet), purchased surfaces increasing, and above all, personal contribution progressing “like never before” – nearly 17% from year to year “it is indeed a revolution in the real estate credit market. Which is currently going on for the most privileged clients.

On the part of the intermediaries, it is the rate of usury, which will be very low in periods of high prices, that has been put forward to explain the exclusion of the most modest clients. This is undoubtedly a note to qualify because banks always strive to keep their customers by playing on other leverages of the effective rate, such as insurance…or commissions paid to intermediaries. Several networks, such as Société Générale, have also suspended their commercial relations with intermediaries.

The Bank of France continues and signs

The Bank of France vehemently rejected the issue of excluding low-income families from the market, putting forward its own statistics to justify both the fund’s limitations and its decision not to adjust the method for calculating the situation last June. wear rate. At the beginning of July, the Bank of France confirmed a growth rate in loan production of 6.8% in May to 27 billion euros, i.e. “The highest level it has reached in the past five years.”

The founder of the online broker Brito, Pierre Chabon, gave his explanation for this apparent discrepancy between the figures of the Bank of France and the figures of Crédit Logement, and even more so, the perception of the field. “The figures from the Bank of France correspond to the actual release of funds from a loan that could have been granted three or four months ago, and therefore under completely different market conditions.”This professional explains. For him, the maximum rate of attrition will take effect in full from next September in the official statistics. The erosion rate is actually calculated, each quarter, on the average rate of loans registered during the previous quarter, increasing by a third. Hence there is a significant lag effect when prices rise faster and faster each month.

HCSF limitations also play a role in this drop in production. Since January 1, it has become mandatory for banks. However, according to the ACPR, about 15% of loan production, at the end of December 2021, was non-compliant with HCSF rules (compared to 23.8% at the beginning of 2021). 15% of production which should now be compliant or withdrawn from the market.

“Output is declining because banks, perhaps, are now respecting these recommendations, which reduces the chances of a portion of customers entering the market, especially those with the least personal contribution.”Michel Mollart suggests. With the combination of all these factors (prices, HCSF, erosion rate, rising property prices, etc.), low-income clients no longer have a place in the mortgage market.

The most fierce credit professional: “The Banque de France seeks to penetrate the market, especially to lower prices in major cities.” A trial of intent also began to annoy the governor of the Bank of France, François Villeroy de Gallo.