This is a figure revealed in August 2023 which illustrates the extent of the problem: according to the CSA housing credit observatory, the number of real estate loans granted fell by 43.2% year-on-year. “The market horizon seems to be brightening, in response to the rise in profitability of new production. But the recovery will be slow and hesitant, as long as access to credit has not been loosened by the Banque de France “, underlines the CSA Housing Credit observatory.
“From now on, we must save, or in any case make substantial contributions, so that the credit file can even be examined, we do not even talk about its success upon exit,” observes Elodie to AFP. Frémont. According to the president of the real estate statistics commission of the Notaries of Greater Paris, “the Roaring Twenties are over; we are going to move to another real estate paradigm.” In the space of a year and a half, rates have quadrupled and could approach the 5% mark soon.
Is the machine permanently seized? This is what some real estate professionals fear. The subject is becoming more and more political. Under pressure to restart transactions, the government is forced to react. The Ministry of Finance could relax credit conditions, the president of the Law Commission of the National Assembly, Sacha Houlié, indicated on Sunday September 24 on France Info. Minister Bruno Le Maire, to whom Sacha Houlié spoke about it, “said to study this hypothesis”, according to the Renaissance MP for Vienne.
“Loosen some conditions”
For Sacha Houlié, the possible avenues would be to “loosen some conditions, either the (maximum debt) rate of 35%, or the exemptions which are open”. In its decision of September 29, 2021, the High Financial Stability Council (HSCF) established two criteria that credit institutions have applied in terms of real estate credit since January 1, 2022: a debt rate of borrowers, including the cost credit insurance, which must not exceed 35% of its income as well as a credit duration which must not exceed 25 years.
“We are extremely attentive to the dynamics of production of real estate loans in France,” Bercy responded to AFP. The ministry specified that Bruno Le Maire had “received representatives of the French Banking Federation (FBF) last week to provide an update on the subject”.
On this occasion, “he notably encouraged them to use all the flexibilities which already exist and which were already relaxed a few months ago”. In June 2023, the HCSF increased the share of real estate loans to which banks can apply their own criteria in an exceptional manner.
However, this measure is insufficient, according to professionals. Caroline Arnould, general director of CAFPI, market leader in credit brokers, recalls in a press release “that at the time, the minimalist relaxations had consisted of using the 20% of derogatory possibilities given to banks measured on three rolling quarters rather than just one, accompanied by an increase from 4 to 6% of the exemption possibilities on rental projects or second homes and nothing else.
Extend the duration of the credit or increase the debt ratio
Caroline Arnould wants “reflection to take place on the remainder of life rather than just on the debt rate”. The remainder of your life corresponds to the amount remaining in your pocket once the monthly mortgage payment has been paid.
Contacted by L’Express, Sandrine Allonier, spokesperson for Vousfinancer, lists two possible options in order to relax the conditions for granting loans: extending the duration of the credit beyond the maximum limit of 25 years, even if this measure “is not in the pipeline” as well as the increase in the debt rate “for those who have the means”.
To illustrate the current situation, Sandrine Allonier evokes the example given by the Prudential Control and Resolution Authority (ACPR), backed by the Banque de France, in its statistics published last June. Thus, the theoretical debt rate of a couple with 4,000 euros of monthly income rose from 34.5% in 2021 to 45.4% in the summer of 2023, and it would even be 47.4% at the end of this year. This couple, well above the 35% limit, would therefore no longer be able to obtain a loan.
According to the APCR, the effort rate, that is to say the ratio of the monthly mortgage payment to the household’s disposable income, was 30.5% in March 2023. “This rate has been around for a long time 30%, this therefore means that borrowers do not want to borrow at more than 30%,” notes Sandrine Allonier.
The spokesperson for Vousfinancer also recalls that property loan rates as high as now already existed in 2008, “but at the time the banks lent without the need for a contribution and for a period of up to 30 years”.
Some banks are lending again
The executive has already tried to stop the negative spiral. Sandrine Allonier indicates that “one of the first effective measures” to unblock the granting of loans was to “monthly pay the usury rate”. This monthly payment, effective since February 1, 2023, “made it possible to avoid the mechanical blocking of loans, but the downside is that this led to a surge in credit rates”. “With a monthly usury rate at the start of the year, allowing banks to cover their refinancing costs, the fear of outright blocking of access to financing has been avoided,” also observes CAFPI.
“The effect of the monthly usury rate did not live up to expectations on the level of production, the regular increases in rates from the European Central Bank (ECB) having thwarted a rapid increase in profitability of new production”, notes for its part the Crédit Logement CSA observatory.
However, he mentions some good news: “credit market activity has rebounded, more strongly than usual this summer”. “The end of the systemic rise in rates allows banks to relax their credit granting policies, by finding suitable margins, they are gradually returning to the market to widely distribute credit,” rejoices Caroline Arnould, general director of CAFPI . Sandrine Allonier also notes that “several national banks and a few regional banks have started lending again since mid-September”, even if some favor “the best profiles”. Some timid clearings in a landscape which should remain gloomy for a while.