Real estate at the end of 2022: why a brake on loan production?

The French still have a strong appetite for real estate, but access to property is hampered by the lending conditions in place in 2022. While the usury rate is a factor of much waste, banks are also choosing to grant fewer mortgages and favor the best profiles, focusing primarily on the purchase of the main residence.

Real estate mortgage production is down

In the first half of 2022 the volume of real estate loans granted has suffered a notable decline. According to the Crédit Logement / CSA Observatory, the fall is estimated at 12.8% between June / August 2021 and June / August 2022 and at 13.5% in terms of distributed amounts.

In May, banks granted € 26.8 billion to household borrowers, an amount that fell to € 20.6 billion in August.

The sharp decline in mortgage production in 2022 is attributed to several factors:

  • the increase in interest rates since March under inflationary pressure and the monetary environment (ECB rate hike)
  • the increase in property prices
  • the stagnant wear level which causes a scissor effect in the face of a surge in borrowing rates.

The deterioration of household purchasing powercombined with the rigorous application of the concession rules imposed by the HCSF and the gradual increase in borrowing rates, it transforms a simple slowdown observed since mid-2021 into a real market deterioration.

More vigilant banks

Forced to respect the usury threshold, banks cannot increase their tariff plans to adapt them to the monetary context. With a inflation at 5.9% over a year in August ea 10-year OAT yield greater than 2%, should show interest rates well above 2%. But the wear rate of 2.57% for credits from 20 years, or almost 70% of the credits disbursed, prohibits any maneuver.

After the blocking effect of wear rate 2022 which generates, according to intermediaries, 45% rejection from home loan from July, banks have anticipated complicated months for loan applicants. The specter of unemployment e payment defaults reappeared in a period in which companies are put in difficulty by the energy crisis and by the breakdown or slowdown of supply chains (war in Ukraine, Covid in China).

Faced with the resurgence of economic turmoil, the Banque de France recently asked commercial banks to do so maintain a sufficient level of capital in order to preserve its financing capacity. The buffer rate, or bank’s countercyclical buffer rate in industry parlance, is expected to rise 0.5% to 1% in December.

The stated goal is to protect bank capital in the context of an economy hit by cascading bankruptcies and households unable to repay loans.

Prioritize the best profiles

As a result, banks are showing themselves more and more cautious about real estate projects, especially if the solvency ratio is close to 0%. Weakened, some have it has stopped the distribution of credits for’immobile. For those who continue to grant loans, supervision is strengthened, even if this means voluntarily and temporarily reducing the production of loans in more finely targeting customers.

The table above requires you to show the whiter paw when you want to borrow. For remain under wear and tear in 2022it is essential negotiate the lowest nominal rate in order to be able to integrate all the costs related to the credit in the Aprilstarting fromborrower insurance. Who gets the best loan terms?

are favorites high income with a job in a stable sector, a debt ratio well below the permitted limit (35%), a significant precautionary savings (at least 6 monthly credit installments) ea personal contribution therefore (at least 20% of the operation). In some bank branches they even go so far as to impose as much contribution as amount lent !

It is also said that he only intends to buy Main residence would be financed,rental property temporarily no longer financeable. This can be seen as the consequence of a disrupted rental market Climate lawthis new regulation which is gradually being implemented, which aims to eradicate it thermal colanders by 2034.

Leave a Comment