Real estate credit: the return of variable rate loans?

Finally a respite in the mortgage market? For the second consecutive month, banks seem to be stalling by limiting the rate hike. According to broker Vousfinancer, most banks froze their balances for the month of September. The rise in average mortgage rates should therefore be contained in the coming weeks.

While this status quo seems like good news at first glance, the situation is actually much more mixed. Banks are in fact blocked by the usury rate (limit rate beyond which granting loans is forbidden), currently set at 2.57% for loans from 20 years onwards. Since average mortgage rates are already relatively high (1.5% over 15 years, 1.75% over 15 years and 1.90% over 20 years in September according to VousFinancer), banks have very little room to raise their rates. They are therefore obliged to delay pending the publication of the new usury rate, scheduled for 1 October.

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A situation that does not help borrowers

In practice, however, this situation does not really benefit borrowers. “Some banks have temporarily suspended their credit production pending the publication of the next usury rate, explains Sandrine Allonier, spokesperson for Vous Financer. The credit market is therefore likely to be sluggish until October and many borrower practices will be on hold for several weeks.

The credit market could therefore unlock in October with the publication of the new usury rate… but not for everyone. Low-income borrowers may still find themselves in a stalemate. “We expect the wear rate to increase by approximately 0.2-0.4 points,” announces Sandrine Allonier. Unfortunately, this increase will be too low to really allow all those who wish, and theoretically can, to borrow.

The return of variable rate loans?

Against this backdrop of usurious rate-linked lending rates, with fixed rates excluding insurance often above 2% with consequent freezing of loans, Vousfinancer notes that some banks are starting to offer variable and mixed rate loans. Variable credit allows banks to offer an interest rate that will change, up or down, over the life of the credit. The rate is generally indexed to the EURIBOR bank credit rate (average interest rate at which financial institutions lend money on the interbank market of the euro area).

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Mixed-rate loans could also make a comeback, allowing banks to offer limited fixed rates during the first few years of the loan, then higher rates for the remainder of the loan term. “These types of credit have all but disappeared in recent months with historically low rates, but they could very well return by the end of the year,” announced Julie Bachet, CEO of Vousfinancer. With lower rates from 0.4 to 0.6 points compared to the fixed ones, they allow you to pass files that would have exceeded the usury rate with conventional credit “. Currently, the number of banks offering variable or mixed rate loans remains limited. But the publication of the next usury rate could be a game changer.

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