Mortgage loan rate: towards a decline at the beginning of the school year in September 2022?

Since last January, borrowers have been facing a significant increase in interest rates. Not a month of the year 2022 without a rise in values, which also accelerated with the resounding return of inflation. He becomes very difficult to borrow to finance a property purchase, and while summer puts projects on hold, what will happen at the beginning of the school year? Does the evolution of the monetary environment give hope for a brake or even a reduction in rates for September?

Further rate hike in August 2022

The barometer of mortgage interest rates it’s like temperatures in France: increasing ! In early August, brokers report significant progress ranging from from 0.10% to 0.35% depending on the duration of the loan. No lull, therefore, on the meteorological side of rates, the upward movement has continued inexorably since last February.

In six months, the average values ​​have jumped by more than 80 basis points. Although it was common to borrow in the classic 20-year term below 1% in December 2021 (excluding home mortgage insurance cost and warranty cost), the average is now a 1.85%the best files can always get a 1.45% rate on this deadline.

In August it will be difficultborrow less than 2% longer term, i.e. 25 years according to the concession rules established by the financial authorities. And for the shorter durations (7 and 10 years), it’s almost impossible to get a rate lower than 1%even with premium profile (high income, personal contribution over 20%, residual savings, debt ratio less than 30%).

Access to real estate credit: difficult in 2022

To use the climate metaphor, drought is raging everywhere in France as the mortgage market is drying up. The credit tap closes as the weeks go by and the rate slider is moved up.

With a gross rate above 2%, how to borrow when the usury rate is fixed 2.57% for loans starting from 20 years ? The margin is very small to integrate into the April (Annual percentage rate) each other costs relating to the granting of creditin addition to interest: application fees, guarantee (mortgage, privilege of the money lender or guarantor), borrower insurance and any broker fees.

However, a rate at 2% or even 3% it itself remains a rate attractive. Before 2016, credits were trading well above without the market being held back. The cause of market blockade is not to be attributed to the rise, albeit brutal, in interest rates, but to the slight variation of the same wear rate 2022.

The fault of a calculation method that is not not updated. Recall that to calculate the maximum rates that credit institutions must not exceed for the next quarter, the Banque de France defines the average April applied for each loan category during the current quarter, if increases by a third.

In three months, wear stagnateswhile interest rates are likely to rise or fall. No adjustment it is not legally possible and in the event of a significant increase in interest rates, loan applicants collidescissor effect.

As a result, among the brokers we register up to 40% rejection due to an APR that cancels wear for the relevant duration. The first victims of the usury rate in 2022 ? They 30-55 years, which represent 51% of those excluded from mortgages. Can they hope to play their cause in favor of a rate cut in the coming weeks?

Reduced rates in September?

The interest rates offered by banks are linked to the monetary environment. An indicator used by banks to define interest rates for individuals has drastically changed: Oats 10 yearswhich is the ten-year bond loan from which the French State borrows, strongly contracted, falling from 2.395% in mid-June to 1.429% today. During a bullish period, interest rates followed suit. With this steep decline, we can expect to adjustment of the borrowing rate ?

Not so sure, because the monetary policy of the European Central Bank (ECB) has shifted gears to try to tackle runaway inflation (6.1% in France and 8.9% in the euro zone in a year at the end of July). On July 21 the ECB rate hike increased the cost of money for banks. One of the main key tariffs, the refinancing rateit went from 0% to 0.50%, an increase transferred to the rates granted to borrowing households and businesses.

Would be it is utopian to hope for a fall in borrowing rates in September, at most one status quo to avoid the complete closure of access to housing credit. The bank margins on this product are minimal or nonexistentbecause institutions cannot adjust their scales to match monetary developments … because of the wear the glass ceiling. Some expect the situation to stand still for several years.

Unless one usury reform that brokers and banks are clamoring for, theaccess to the mortgage will become a mirage for more and more families. Some brokers suggest taking out April borrower insurance to stay under usury. Radio silence from the financial authorities.

Claiming that “we are moving towards more normal financing conditions that do not prevent the good financing of real estate”, the governor of the Banque de France François Villeroy de Galhau refuses to admit wear problem and deprives thousands of families of an unstoppable leverage to support them purchasing power : to be landlord through a fixed rate loan well below inflation rather than being tenant and subject to fluctuations in rent.

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