Real estate loans: tips to make it easier to get a loan

In August 2023, a number was announced that illustrates the magnitude of the problem: according to watchdog Crédit Logement CSA, the number of mortgages originated fell 43.2% from the previous year.

"The market outlook seems clearer in response to the rising profitability of new production. But the recovery will be slow and uncertain until access to credit is expanded by the Bank of France. " highlights the Crédit Logement CSA watchdog. "It is now necessary to accumulate savings or make a significant contribution for a loan application to be considered at all, let alone successfully completed. " notes Elodie Frémont at AFP.

The easing of credit conditions

According to the chairman of the real estate statistics commission of the Notariat of Paris, "the crazy years are over, we are moving to a different paradigm in real estate". In a year and a half, rates have quadrupled and may soon reach 5%. Is the car stuck forever? That's a concern for some real estate professionals. The issue is becoming increasingly political.

Under pressure to revive the deals, the government is being forced to respond. The Ministry of Finance may ease loan conditions, the chairman of the National Assembly's legislative commission, Sacha Houlié, told France info Sunday, September 24. Minister Bruno Le Maire, who was told about it by Sacha Houlié, "said he would consider the proposal," said the MP for Vienne. According to Sascha Ullier, possible options would be "relaxing some of the conditions, either the rate (maximum debt) of 35% or the available exceptions".

Lending criteria

In its decision of September 29, 2021, the High Council for Financial Stability (HSCF) established two criteria that credit institutions apply to mortgage lending as of January 1, 2022: the borrowers' debt level, including the cost of loan insurance, must not exceed 35% of his or her income, and the loan term must not exceed 25 years. "We are following the dynamics of mortgage lending in France very closely,",the AFP said in Bercy.

The ministry emphasized that Bruno Le Maire last week "met with representatives of the Federation of French Banks (FBF) to discuss this issue. "In this regard, "they were particularly encouraged to use all the flexibilities that already exist and that were already eased a few months ago. "In June 2023, the HCSF increased the proportion of mortgages for which banks can apply their own criteria. However, some professionals believe this is an insufficient measure.

The options for easing conditions

Caroline Arnoul, CEO of CAFPI, a market leader in loan brokers, recalls in a statement that "back then, the minimum mitigations were to use 20% exclusivity given to banks for three consecutive quarters instead of one, and to increase exclusivity from 4% to 6% for rental projects or secondary housing and nothing more." Caroline Arnoul would like to see "a review taking into account the remaining balance to live on, not just the level of debt". The remaining balance to live on is the amount left in your pocket after paying the monthly mortgage payment.

To L'Express, Sandrine Allonnier, a spokeswoman for Vousfinancer, lists two possible options for easing loan terms: increasing the term of the loan beyond the maximum limit of 25 years, although this measure "is not in the plans", and increasing the level of debt "for those who have the means". To illustrate the current situation, Sandrine Allonnier cites an example given by the Autorité de control et de regulation (ACPR), associated with the Banque de France, in its statistics published last June.

Regulatory attempts

The representative of Vousfinancer also recalls that such high mortgage rates already existed in 2008, "but then banks gave loans without the need for a down payment and for up to 30 years". The authorities have already tried to stop the negative spiral. Sandrine Allonnier points out that "one of the first effective measures" to unblock the provision of credit was the "one-month regulation of the interest rate threshold". This one-month regulation, in force since February 1, 2023, "helped avoid a complete blockage of access to finance, but led to an increase in interest rates on loans"."With the introduction of a monthly interest rate that allows banks to cover their refinancing costs, a complete blockage of access to finance has been avoided," "CAFPI also notes. "The effect of the one-month interest rate has not been in line with output expectations, the regular interest rate hikes by the European Central Bank (ECB) have prevented a rapid increase in the profitability of new production. " - notes the watchdog Crédit Logement CSA. However, he reports good news: "activity in the credit market has revived more than usual this summer. ""The end of the systematic rise in interest rates allows banks to soften their lending policies, returning to satisfactory margins, they are gradually returning to the market to distribute loans widely. " "Caroline Arnoul, CEO of CAFPI, rejoices at the announcement.

Sandrine Allonnier also notes that "a few national banks and a few regional banks have started issuing loans again since mid-September. " although some prefer "better customers. " A few dim brightenings in a landscape that will remain bleak for some time to come. "