families are rushing to grant loans so as not to miss the opportunity

French banks saw a huge increase in mortgage lending during the second quarter of the year. Households are now borrowing as loan conditions are still excellent and they believe loans may become even less affordable in the future.

Not to miss the opportunity for many families

In order not to see their real estate projects fail, many French people have rushed to their brokers and bankers in recent months. Blame it on higher interest rates and tighter loan terms. As a result, according to Les Echos, the vast majority of banking institutions had a particularly active second quarter.

In recent months, according to data from the Banque de France, outstanding loans have increased by more than 6.5%. This number explains why many families have turned to their banker or broker for a mortgage because they fear that future credit rate hikes will make their projects much more difficult to finance.

The rise in mortgage lending in the second quarter is similar to the 2019 level, as data from the Banque de France show. The stock level is almost as high as just before the health crisis in the fall of 2019.

Banque Postale’s chairman of the board, Philippe Heim, explained that since rates were due to rise soon, many French people rushed to their bank branches to finalize their loans. This is evident in all French banks at the moment, as they have just released their results and they are very good.

The outstanding mortgages of the 39 regional banks of Crédit Agricole increased by 5.9% to 372.8 billion euros. The momentum is stronger for LCL, a subsidiary of Crédit Agricole, whose credits increased by 9.2% to 96 billion euros.

Mortgage lending and retail banking both had a positive impact on performance. However, according to Mr. Heim, this could slow down in the second half.

Always interesting rates

According to its president Nicolas Théry, the Crédit Mutuel Alliance Fédérale recorded a historic semester. Loans outstanding increased by 9.5% to 248 billion euros. The same phenomenon occurred at La Banque Postale, where loans in the first half of the year increased by 5.5% to 65.7 billion euros. Loan production in the latter also increased by 21% during this period, which is 10 times the market average.

BNP Paribas and Société Générale, which target the wealthiest borrowers and thus have smaller market shares, have also increased their loans. BNP Paribas rose 5.9% to 98.6 billion euros at the end of June. Société Générale plus 4% and its subsidiary Boursorama plus 27%.

This credit boom is evident in most French banks. Nonetheless, a gradual increase in interest rates since the beginning of the year. According to the Banque de France, the rate on new loans reached 1.34% at the end of June, compared with 1.1% in January last year.

However, some market professionals predict a slowdown towards the end of the year. Mostly because of the “usury rate”, which is the highest rate a bank can lend at. This tends to increase slower than interest rates, which can block many files.

Despite this recovery, interest rates are still very low and well below inflation. In other words, real interest rates are always negative and therefore very beneficial for borrowers.

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