Real estate credit: towards a stabilization of the market?
Mortgage rates granted to individuals fell to the historic threshold of 3% in April. The market seems to be stabilizing but the restart is still far away!
According to the latest study by the Good Lenders Finance , the average interest rate on mortgage loans granted to individuals by banks in France has reached the historically low level of 3%. “Never before have mortgage lending rates gone so low,” the study says. According to Michelle Polliart, professor of economics at the University of Paris Ouest Nanterre la Défense and author of this study, the fall in activity is halted, but the recovery will be long as long as the economic situation and purchasing power will not go back up ”.
This drop in rates is a boon for buyers who benefit from an “exceptional financial environment”. According to Michelle Polliart, it is “likely” that rates will continue to fall even if the market usually starts again from March. But “credit conditions cannot offset worries about the future and the job market,” he said.
Lower cost of resources
The Good Lenders Finance / CSA observatory explains in the study that this drop in rates “is based on the willingness of credit institutions to support the activity of markets in sharp contraction, in a climate of competition that the usual seasonal renewal of demand only reinforces”. This sharp drop in interest rates benefited the new home market, up 2.98% in April, but also the old market (+ 2.99%) and the construction market (+ 3.04%).
This reduction in rates is also explained by an “exceptional reduction in the cost of resources” because the banks back their loan rates to the key rate of the Best Bank which is itself at its lowest historical level (0.5%). Last reason, the “maintenance of the claims rates of the borrowers at very low level” which shows that the risks of losses can be supported by the credit institutions.
Greater use of debt
Borrowers take advantage of this favorable context and we can see that the amount of mortgage loans granted by banks is on the rise again: + 9% from February to April compared to the previous 3 months. On the other hand, the number of files granted increased more slowly (+ 2.1%).
With attractive interest rates, “demand has no advantage in using its personal contribution and uses debt more than in the past” explains Michelle Polliart . In the end, credit production is still down (-11.6% in April over a year). It had dropped 26.4% in 2012.
The new home market suffers from the new PTZ allocation conditions
Undergoing changes in the zero-rate loan (PTZ +) marked by a drop in resource ceilings since January 1, 2013, the new home market continues to sink. “Between 2011 and 2013, 40,000 to 50,000 people will have lost the benefit of the PTZ” says Michelle Polliart and in this sector, the volume of loans continued to decline (-6.2% over 12 months and -14.1% over 3 rolling months) .
For its part, the old market, which had deteriorated in 2012 with the disappearance of the PTZ, is stabilizing “after 18 months of fall in activity”. Before this abolition, 260,000 households benefited from it. In this market, the rebound is felt. Even if the amount of loans is still decreasing in annual rate (-15.5%), it has increased since the beginning of the year by 19.1% in quarterly rate.
The fall in rates and the fall in prices restore purchasing power to buyers. They allow, for example, to acquire on average one more room in the provinces and a few additional m² in Paris.