In the inflationary environment and as real estate prices have reached record highs, the French real estate purchasing power is being abused. For borrowers struggling to access credit, is the variable rate solution a good choice?
Loan rate recorded 11/07/2022
Difficulty in accessing credit conditions
With the rapid rise in interest rates, many loan applicants have been turned down. The cause of this block? An excessively low usury rate that has forced the vast majority of establishments to refuse mortgage applications. The usury rate, in fact, sets the ceiling beyond which credit organizations cannot lend. Calculated quarterly by the Banque de France, the usury rate is based on the average of the rates charged by the banks in the previous three months, plus one third. However, the wear rate remained unchanged a rather low threshold that prevents many borrowers, especially the most vulnerable, to access credit. His latest detection of 1uh last October may not be enough. In fact, if the new maximum rate gives new life to the market, setting the usury rate at 3.03% for a 10 to 20-year mortgage, and 3.05% for a 20-year or more mortgage, could not last. And for good reason, market rates keep rising and therefore always stay out of step with usury rates.
The variable rate loan: a new option for banks
It is in this context that some lenders offer the variable rate option. Scrapped during the 2008 financial crisis, the adjustable-rate mortgage has never been a big hit in France since. However, in practice, the latter begins at a level below the fixed rate of the first year, but it evolves upwards or downwards for all or part of the term of the loan. A lower rate at the start of the loan that allows you to drop below the usury rate and get your mortgage.
Supervision is necessary in the face of the variable rate
You should know that the variable rate loan is considered more risky. To provide greater security, the rate can also be capped and subject to a limit of between 1% and 3% on both the upside and downside. While some banks offer variable rate mortgages, this is far from true for everyone. As Cécile Roquelaure, director of studies at Empruntis points out: “a regional bank has reinstated it in its scale, but wants it to be used only for specific needs such as a transitional loan”.
The alternative of mixed or semi-fixed rate loans may also be offered by some banks. A solution that allows you to benefit from the advantages associated with the stability of the fixed rate and the fluctuation of the variable rate. To find the loan that best suits your needs, it is highly recommended to use a specialized broker. This professional, thanks to his knowledge and his network, is the best resource of the borrower to obtain a tailor-made loan at the best conditions.
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from 1.10% over 15 years(1)