Banks stuck in a binding. First and foremost, they benefit from the good news. According to the decisions of the Central Bank, their deposits have not been taxed since July 27 and in theory they have the right to lend at higher rates. Which raises their margin a little.
However, they will not take advantage of it to raise mortgage rates. It fluctuates between 1.8% and 2.2% in July for 20-year loans and should not move for the next month, warns Sandrine Allonier, a spokeswoman for the short Vousfinancer: “There should be the status quo in August due to staff shortages, but also because of the impossibility of processing files” .
Mortgage credit: Will 2022 sign the end of the soft loan?
Corrosion rate, structural problem
The biggest obstacle facing banks (and customers) is structural and has to do with the rate of erosion. This maximum rate beyond which institutions are prohibited from lending is still very low and makes their margins… negative. It is currently set at 2.57% for loans of 20 years and more. Maël Bernier, a spokesperson for broker Meilleurtaux, warns that “when you get the 2% rate, the insurance, filing and warranty costs quickly exceed wear and tear.” “After 1.8%, it becomes very difficult to stay below the wear rate,” Sandrine Alonier abounds.
“Refinancing banks now costs a lot more. They are unable to incorporate this increase in their rates due to the wear and tear,” explains Carolyn Arnold, director of development at broker Caffee. Increasing the credit interest would really have the opposite effect for the banks. . They’ve already increased their rates significantly since the beginning of the year, and pushing the envelope even further will make all files unfundable. Conversely, they are reluctant to compromise on interest rate cuts because they have not been able to sufficiently increase their margin during the rally. Interest on French debt, a situation that forced them to take a “reserve” position, according to credit brokers
Olivier Landrevie, President of CAFBI, confirms, “We are noticing a gradual freeze of mortgage loans on the ground. Since the beginning of the month, only one out of two files is facing difficulties due to the rate of erosion! (…) Many banking networks have openly put themselves on the sidelines rather than on the sidelines. Lending at a loss.
The number of loans decreases
Unable to increase the profitability of their mortgage loans, so the banks close the tap, and potential borrowers have to pay the loan. A broker warns that it is somewhat of a disaster. The banks stopped their activity and asked us to come back in September. Most have revised their credit production objective downward.” Some have already stopped part of their credit production with intermediaries, but also directly in their subsidiaries, such as Société Générale, Crédit du Nord or BNP.
The result: Year-over-year, between April and June, the number of loans granted fell 9%, as determined by the Housing Credit Observatory. However, the landscape is not completely black. Outstanding mortgage loans stood at 6.8% in March according to the latest data from the Bank of France. Borrowers are becoming scarce, but loan amounts are increasing to keep up with the increase in property prices.
Receive our latest news
Every week your appointment with Real Estate News.