Real estate loan: will banks lower their rates?
Mortgage: will banks lower their rates?
Nearly twenty banks increased their mortgage interest rates quite significantly during the month of April. Currently in such a context, these rises can be a real brake on the recovery of the market. Especially when usury rates remain in persistent decline during the month of April, handicapping modest borrowers on high rates over a very long period.
Banks should necessarily, in a goodwill, adjust their rates during the recovery of demand in order to help the market recover. In particular for the real estate sector remaining above all a sustainable and sustainable investment.
However, activity is currently on pause and the main objective of the banks is to advance the files of loans in progress. New credit applications fell by 72 % during the 3 weeks of confinement compared to the same period in 2019, even if it is still possible to obtain a mortgage, with a lot of patience.
Rates supporting an increase of up to 0.70%
With certain exceptions, all the scales received in April recorded a significant increase, ranging from 0.05 to 0.70% for some banks vis-à-vis the most complex profiles; regional banks are mainly concerned, against only one at the national level. More generally, a variation of 0.15 to 0.25% is to be noted on the increases in borrowing rates, resulting in a high overall rate in view of current conditions.
This decision-making can be correlated with an anticipation of increases in conditions for obtaining financing from banks in the coming months. With this increase, banks are restoring their margins at a time when competition is scarce over the processing of new cases.
Towards a market on hold linked to a drop in loan applications?
The current climate worries the French more on a health aspect, postponing most real estate projects. However, some brokers remain mobilized, continuing to process ongoing files to change the loan applications filed in recent weeks, despite the closure of agencies to the public. While also carrying out envelope calculations to anticipate the recovery of the market. Especially for those who still have a project in progress and who would sign a sales agreement, applying for a mortgage is still possible.
On 3 April, a decree authorizing remote signatures of deeds was issued. Allowing to fluidify the transactions in progress, in order to anticipate the recovery as well as possible by avoiding saturation in notarial studies during the deconfinement.
These measures allow fluidification and planning towards an approach to deconfinement. The latter is likely to be gradual, while the entire chain of the real estate transaction process is slowed down despite the adaptation efforts of all these actors. Such as the notable effort of banks extending the validity period of their loan offers by 60 days, from 30 to 90 days.
In parallel, Ordinance No. 2020-306 Article 2 of 25 March 2020 invites the extension of deadlines expired during the health emergency period and the adaptation of procedures during this same period. By this order, the periods of suspensive conditions are extended in order to allocate additional time to borrowers in this complicated period to obtain credit.
How to predict the next changes in rates?
The current rates are on average over 25 years of 1.60%, over 20 years of 1.40% and over 15 years of 1.20%, an increase of 0.05% when wear rates have just decreased, a scissor effect is particularly possible on the most complex profiles.
Potential rate hikes or decreases will relate directly to the duration of the lockdown but will depend all the more on the speed at which the deconfinement takes place, opening up more stable long-term prospects. Assuming a recovery from September, banks would possibly keep rates low to restart the market and compensate for the delay, even if it means reducing their margins.
Banks should necessarily, in a goodwill, adjust their rates during the recovery of demand in order to help the market recover.
However, the activity is currently on pause and the main objective of the banks is to advance thefiles of loans in progress.
New credit applications fell by 72 % during the 3 weeks of confinement compared to the same period in 2019.
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Posted on 21/10/2021 by
Andy LECUYER
