Several mortgage brokers have confirmed a small return on floating rate loan offers this summer. These offers are still very limited and restricted to a few banking institutions such as regional banks, however these offers are limited, i.e. the loan rate cannot be revised by more than one point over the loan term of the loan with a maximum of one or two points for the given loan2.
The share of variable rate mortgages peaked at about 20% in the years 2004-2005 according to the Crédit Logement CSA. Variable rates still represented just over 6% of loan production in 2010.
Variable rates have completely disappeared from the real estate scene in recent years with the steady decline in rates. At that time, prior to 2010, these offers could have been used to bet on future rate cuts. Today, this is no longer the case, but variable rates can above all help bypass the hurdle of usury thresholds because the borrower benefits from a lower attractive starting rate than fixed rate networks.
Counter proposals at variable prices
We see that some banks have started to offer counter-proposals at variable rates. Others assured us that they are considering aggressively promoting the variant to their trading network and the brokers they work with.” We were told, for example, by online broker Pretto in early August.
” Some banks, after the notable increase in fixed interest rates, started to revitalize proposals with revisable rates known as “cap”, i.e. at a cap rate. This solution makes it possible to obtain a base price lower than the quoted price at a fixed rate, sometimes to free itself from the limitations associated with the rate of wear, which is currently particularly low. Files that will not be bankable, due to regulatory restrictions, can find funding at variable rates. ‘,” explains Alban Lacondamine, founding president of broker company Emprunt Direct.
How it works ?
Taking the example of a variable rate loan with a maximum of 1 to 1.50% over 20 years, the borrower will benefit from a starting rate about 40 basis points lower than the average fixed rate currently offered by banks (1.90%). This loan cannot be reviewed by more than one point during the term of the loan i.e. 2.50% max. For this type of loan, the rate is generally revised every year compared to the 3-month Euribor, which is the interbank rate which was still negative at the beginning of July but is gradually rising (0.351% on August 17th). Suffice it to say that if you currently take out a variable rate loan, you will have little chance of escaping the upward revision of your rate even if the downward revision is still theoretically possible (still dependent on Euribor for 3 months).
Limited risk to bosses 1
However, the risk of increasing the monthly payments to repay the fixed-rate 1 loan is limited. For €200,000 at 1.50%, the initial monthly loan installment would for example be €965 and could increase by about €100 if the rate was adjusted up to 2.50%.
For fixed-rate loans, the nominal price of the loan is determined by the bank at the time of signing the contract and will not change throughout the repayment period, except in the case of renegotiation of the loan. Payment dates are fixed but can be skewed. Some banks offer the possibility of adjusting the repayment deadlines, that is, increasing or decreasing the amount of monthly payments (within contractual limits) according to their financial situation.