Since last spring, the real estate market has experienced a slowdown as it has not been seen for a decade. The year 2022, however, which started very well, should thus close with a sales volume of less than 900,000 housing units, compared to over 1.1 million in 2021. Have tenants lost the desire to own their roof? And would the continuous increase in prices since 2015 (+ 3% per year on average) scare them? For nothing. The reason for this sudden disaffection is to be found in the tightening of the conditions for the granting of mortgages, which blocks the projects of many candidates for membership. “We are faced with clients who want to buy, have the means, but who cannot obtain financing for regulatory reasons,” sums up Kurt Vural, commercial director of the asset and brokerage consultancy Selexium.
The fault lies primarily with the usury rate, which is supposed to protect individuals from abusive financing terms (includes credit interest, death insurance, collateral and handling fees) and which banks cannot exceed when lending. This usury threshold, set quarterly by the Banque de France (on the basis of the average rates charged by credit institutions, increased by one third), was between 2.27 and 2.29 until last September,%, depending on of the repayment term.
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Except that with the increase in credit rates, by almost 1 point in a year, and the possible increase in the cost of death and disability insurance, it has very often been exceeded. Hence the repeated refusals of loans by bankers. According to the Union of Credit Intermediaries, almost 45% of the cases filed last September were rejected. It is true that for twelve months the usury rate has been regularly revised upwards: since 1 October it has been between 3.03 and 3.05%. But with market rates rising at the same rate, the story seems endless. “For a few more months we will certainly see the credit market relax a little after each increase in the usury rate, to the benefit of the borrowers, and then recover”, anticipates Ludovic Huzieux, associate director of Artémis brokerage.
In this very special context, loan applicants have an interest in not trailing too long to get started. Indeed, despite the clear upward trend, the rates charged by most banking institutions remain low. “They are on the order of those of the summer of 2016, which were then much lower than those observed in previous years,” recalls Cécile Roquelaure, director of studies at Empruntis. That is to say that they navigate, on average, between 1.20 and 2%, depending on the repayment term and the customer’s risk profile.
Real estate credit: usury rate, grant criteria… who can still borrow?
However, beware, the shocks that the economy suffered in 2022, mainly caused by the war in Ukraine (increase in energy prices, difficulties in the supply of agricultural and industrial raw materials, etc.), will continue to fuel the increase. inflation, at least in the first months of 2023. Which will inevitably lead to a further increase in mortgage rates. How much? With the help of the broker Empruntis we have developed three more or less pessimistic scenarios, with rate hikes ranging from + 0.7% (less than in 2022) to + 1.5% (more than in 2022).
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In many cases, our table shows that the borrower will lose a large sum by postponing his project, even with a concrete practice. See the example of this couple of employees in their thirties, with an irreproachable profile (permanent employment contract, two or three years of professional seniority, 10% personal contribution, savings products, nothing discovered for a year …), who are looking for borrow 200,000 euros: in a repayment period of twenty years, you can now get an interest rate of 1.48%, bringing the amount of the monthly installments to 986 euros. If this pair decides to postpone the acquisition for a few months, and the worst case scenario occurs (rate hike by 1.5%), they would have to borrow at 2.98% and repay € 1,130 per month. Or 144 euros more.
(1) Simulations carried out for a loan of 200,000 euros, taken out by a couple of 30-year-old employees. (2) Including death and disability insurance. (3) This is the minimum taxable net monthly income, which allows compliance with the debt criteria of the Higher Council for Financial Stability (HCSF) of 35%. Source: loans.
But the rising cost of credit isn’t the only concern in sight. Borrowing capacity, closely linked to it, can also become a critical point. Indeed, in accordance with the latest directive of the Higher Council for Financial Stability, issued at the beginning of 2022, banks now require that, subject to exceptions reserved for their good customers (and up to a maximum of 20% of their quarterly production of loans), the part dedicated to reimbursement, including insurance, does not exceed 35% of its net income (before tax).
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Let’s go back to our couple in their thirties who want to borrow € 200,000, but this time in fifteen years. And suppose they only have an “average” practice: with the current rate of 1.80%, which they can claim, their monthly net income must amount to at least € 3,689. But in order not to be thrown out of the game if the rate drops to 3.30%, they will have to justify € 4,093 of net salary. This is almost 11% more!
Of course, to get yourself out of trouble, you can first try to borrow in a region where rates are below the national average. This was the case last September in Auvergne-Rhône-Alpes, New Aquitaine and Occitania, where, on average, 1.85% could be obtained in twenty years, against 2% almost everywhere, especially in Ile-de-France. But very often banks require that the coveted property be located in their region, or even in their department (it is sometimes accepted on the fringes of the department).
Real Estate Credit: Depending on your region, rates make a big difference
Hence, multiple financial solutions can be worked out. One of the most effective is to ask the banker to activate a “multiline” loan: instead of a single loan, several are concluded, each with a different repayment term. For a loan of 250,000 euros, offered at 2.65% in twenty years, you will therefore borrow 80,000 euros in ten years, at 2.35% (rates are lower on short periods), and 170,000 euros in twenty years. years, always at 2.65%. Knowing that the monthly payments are then smoothed over the longer duration of the two loans (here twenty years). Profit from the operation: 13,300 euros!
To notice that a multiline generally overlaps two loans, but can integrate a third one, for example a zero-interest loan, therefore free, for those who are entitled to it (first-time buyer of a new or old main residence to be restored, subject to the conditions of income).
Another possible financing possibility is that of the “mixed” rate, which mixes a fixed-rate loan, therefore safe, and another at a variable rate, cheap at the beginning (less than 1.70% today), but more how risky: its rate can fluctuate both downwards and upwards depending on the economic situation. Concretely, for a loan repayable in twenty years, the fixed rate loan is applied only for the first eight to twelve years, which allows to obtain an advantageous rate (1.60% in ten years, for example), therefore the variable loan rate takes over.
What if its cost had skyrocketed at that time? In general, the loan agreement provides that the borrower can always return to a fixed rate (with an increase of at least 0.5 points in any case). However, the formula is especially interesting for those who have planned in advance to resell their home (and therefore pay off their credit) before switching to the variable rate.
Real Estate Credit: Because you need to submit your zero-interest loan (PTZ) file as soon as possible
Last technique to use, and one that we often tend to forget: negotiate your rate. The best way to get a discount from 0.10 to 0.15 points is to submit a personal contribution of 20 or 25%, however much higher than the 10% requested. Taking out auto or home insurance from the bank or opening life insurance also works very well. Do not forget, first, to wander around the premises of your city: with an equivalent profile, according to the commercial policy of the bank (it changes almost every month), there can be a difference of 0.2 to 0.3 points for a repayable loan in twenty years. And if this task discourages you, call a broker. It will do what is necessary for you, giving you the benefit, as a bonus, of very advantageous death insurance. Sure, you will pay a commission (around € 1,000), but it won’t weigh much against the € 5,000-10,000 savings you can get.
The return of variable rate loans?
If interest rates continue to rise at the current rate, floating (or “reviewable”) rates, which have not been mentioned for years, could quickly return to the fore. Logic: they start at levels of 0.3 or 0.4 points lower than fixed rates, thus allowing borrower candidates to stay in line with the usury rate (legally unsurpassed) and the maximum debt of 35% (ratio between installments monthly and net income). So to get their loan.
Certainly, a variable rate involves a share of risk: indexed to the short-term cost of money (Euribor), it can go up or down, every quarter or every year, during the credit. But only within certain limits: in France it is always “capped”, that is, it cannot exceed a certain ceiling, nor go below a previously defined floor threshold. Example with a capped loan at +1 point, the most used: its rate starts at 1.6% (which is interesting compared to the 1.9 or 2% that is often offered as a fixed rate for “average” profiles ), and may never exceed 2.6%. Be warned, though: the debt ratio of 35% is generally calculated on the capped rate, not the starting rate, which is not always enough to get the tightest budgets into the field of borrowers.
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