Real estate credit: warning to borrowers, rates are rising faster and faster

Mortgage lending rates stood at 1.68% in July versus 1.52% in June according to the latest Housing Credit Observatory / CSA in July. A faster rise over the months.

The average mortgage rate on the rise since December

The average mortgage rate has been on the rise since January. And this increase becomes more rapid over the months, from 2 basis points (bps) at the beginning of the year to 13 bps in June and finally 16 bps in July according to the latest data from the Crédit Logement Observatory.

Inflation and financial market tensions since the outbreak of the war in Ukraine have largely contributed to this development. However, this increase in the average rate since December 2021 (+62 bps) remains much lower than that of the 10-year OAT (+169 bps) or the inflation rate (+229 bps).

Mortgage rates remain well below inflation

All borrowers benefit from loans at rates well below inflation, which has never been seen since the early 1950s.

The abundance of low-cost savings resources and the refinancing conditions offered by the ECB have so far favored the possibility for banking institutions, also constrained by the usury rate, to limit a too rapid rise in lending rates.

In any case, since December 2021, loan rates have all increased by at least 60 bps, regardless of their duration at the time of granting.

Record duration of the loan at 244 months against 240 months in June to compensate for the rise in interest rates

In July, the average duration of the loans was the longest ever recorded: 244 months.

Long durations retain the possibility of realizing some loans in a context of rising house prices and increasing mandatory personal contribution rates that persists.

The impact of the tariff increase is also limited by this lengthening of the duration: since December 2021 the annuity rate has increased by only 5.0%.

In July, 64.9% of bank loans for home ownership were granted for a duration between 20 and 25 years: the relative weight of this duration band remained at a high level, even if from last May no longer advances; for the benefit of shorter loans (15 years and less), the share of which appears to be slowly recovering.

The home loan manufacturing market is deteriorating

In a context of strict application of the HCSF recommendations, and the additional shock caused by the war in Ukraine and inflationary pressures, the number of loans granted has weakened from a simple slowdown to a deterioration of the market.

The number of loans granted decreased by 11.4%, on a rolling quarterly basis.
At the same time, credit production measured on a quarterly rolling basis decreased by 15.5% year-over-year.

In mobile annual terms, the decline was 5.6% at the end of July and the number of loans granted decreased by 7.5%.

The increase in the personal deposit illustrates the difficulties in accessing mortgages for many families

The transformation of customers has strengthened since last March in a period of sharp deterioration in household morale.

As of July 2022, the average down payment level was 49.5% above the level of December 2019, when the market was at its peak and the inflow rate at its lowest. This development illustrates the difficulties encountered by a large number of families in carrying out their real estate projects, those whose personal contribution is now considered insufficient.
As transaction cost also continues to rise, the average relative cost remains very high at 4.7 years of revenue as of July 2022.

The above data comes from L’Observatoire Crédit Logement / CSA for the month of July 2022.

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