Why getting a mortgage is so difficult in France

M.I was never called back by the banker and the one who promised to give us credit in exchange for the transfer of my accounts did not follow up … “

The bitter experience of Gilles, this 39-year-old nurse with a Nice but well-established patient base, is widely shared by thousands of real estate candidates in France. A real drag! First-time buyers, young professionals, self-employed, retirees … These categories of population are being overtaken by a sudden economic reality: their exposure to the usury rate. Direct consequence: thousands of French are excluded from the real estate market.

Different categories of the population affected

Disgusted, disillusioned, disappointed … The buyers put their real estate project in the boxes when they could have been shaken by the banking conditions in place a few months ago. This mechanical lock automatically excludes people of a certain age or who have experienced health problems. But also single. In concrete terms, more and more people are giving up on their project due to the refusal of a bank loan.

With the rapid rise in interest rates, obtaining a mortgage is increasingly difficult, also denounce brokers, developers and real estate agents, who are alarmed by the consequences of these difficulties in the long term.

In their sights? The wear rate. It currently stands at 2.57% for 20-year mortgages, all costs included, including insurance and any broker fees. However, as banks themselves borrow more expensive loans than at the start of the year, they may be tempted to oust brokers to preserve their margins.

The Banque de France stands out from the alarmist observation of brokers. The institution reminds that the usury rate is made “to protect the families who borrow, not the interests of intermediaries or lenders “.

For now, the only solution is to wait for the wear rate to be revised. Only 1 will be seen againuh October 2022.

Watch out for foreign markets

Meanwhile, professionals in the sector are scrutinizing the consequences on a real estate market already strained by the scarcity of assets.

Those of Paris and the French Riviera remain separate. They attract a national and international clientele who keep the prices quite high. Some buyers who pay in cash will be able to negotiate their purchases better, for lack of competitors, and lower their property prices a bit. It mainly concerns investors and local businesses will suffer “, explains the partner of a real estate agency who prefers to remain anonymous.

Since the upward trend in interest rates is general, experts are watching just as closely what is happening abroad. And in the United States, in particular, where the subprime mortgage crisis triggered a global financial crisis in 2007, starting with the rise in key interest rates …

In recent months, American buyers have been deserting the market precisely because of the rise in interest rates.

However, as in the French Riviera and in the Var, the real estate sector has recovered after the Covid-19 crisis, thanks to historically low interest rates, solid household savings and their desire for space, outdoors and greenery driven by the telework.

In addition, strong demand and insufficient number of properties for sale have pushed prices up since the summer of 2021.

Is the borrower’s insurance at the center of the block?

Over 40s are the main victims of mechanical blocking, it is almost impossible for them not to exceed the wear rate. For a very simple reason: they pay more for the borrower’s insurance, which covers various risks such as death, illness or disability. This mechanism protects both borrowers and banks from possible non-repayment.

And it is becoming quite common for home loan borrower insurance to raise questions.

First of all because of a certain hypocrisy. Because the bank where you withdraw your credit is authorized to offer you a contract. But nothing prevents you, since the Hamon law, from competing with equivalent guarantees. It’s just that banking partners remain reluctant to see you contract elsewhere.

And for good reason … The borrower’s insurance market is estimated at nearly € 10 billion in premiums per year and affects about seven million homeowners with outstanding claims.

In June, a law reforming the system came into force which should simplify access to and termination of these contracts. It allows you to change the borrower’s insurance free of charge at any time and no longer just on the anniversary date, for each new contract stipulated from 1uh June.

Removed the medical questionnaire for loans below € 200,000

Insurers will have to inform borrowers annually of their right and how it is enforced. This provision will apply to contracts in progress from 1uh September.

The second part of the law concerns the medical questionnaire necessary to obtain the borrower’s insurance: it is abolished for mortgages of less than 200,000 euros per person whose maturity expires before the borrower’s 60 years of age.

Finally, the “right to be forgotten” period for former cancer or hepatitis C patients is shortened to five years after recovery, instead of ten. After this deadline, therefore, they will no longer be obliged to declare their illness.

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