Baptiste Morin with AFP / Photo credits: Arnaud Paillard / Hans Lucas / Hans Lucas via AFP 07:11, September 26, 2023, modified at 07:11, September 26, 2023Faced with the fall in the number of mortgages granted, the authorities will meet on Tuesday to decide, or not, to adjust the rules that govern them. During this now well-established ritual, the Bank of France is expected to argue for maintaining credit conditions in the face of a more open Minister of the Economy.
Currently, banks do not have the right to grant credit whose monthly payments exceed 35% of income and with a duration of more than 25 years. However, they may derogate from these criteria in 20% of cases, provided that the derogations primarily concern principal residences and target first-time buyers in nearly a third of cases.
Trading volume fell sharply
But while the real estate sector is experiencing a drop in its activity, some do not hesitate to speak of crisis. "There is no one intellectually who can endorse and find it logical that we keep in 2023, a period with historically high rates and historically low transactions, the same credit conditions as in 2019, when rates were historically low and the volume of transactions historically high," Bérengère Dubus, secretary general of the UIC, told AFP. main syndicate of mortgage brokers.
Interest rates are close to 4%
After a post-Covid shopping frenzy and a record year 2021, the volume of transactions has indeed fallen heavily. In July, 10.1 billion euros of mortgages, excluding renegotiation, were granted, a low since April 2016 and nearly half as much as in July 2022, according to the Bank of France.
As for new housing bookings from developers, they fell by nearly 40% year-on-year in the second quarter, to 18,000. In addition to higher interest rates, which rose on average from 1.06% in December 2021 to 3.63% in August 2023, buyers are faced with more cautious banks, which require increasingly large contributions.
So far, the governor of the Bank of France François Villeroy de Galhau has partly managed to resist the blows of those calling for relaxation, evoking a "normalization" to those sounding the alarm. "However, it is desirable now that the production of real estate loans stabilizes and then gradually resumes," he recently told AFP. But "artificially reviving the sector by over-indebting borrowers would be a dangerous solution," he added.
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Request for further easing
Several presidents of Assembly committees as well as the general rapporteur of the budget Jean-René Cazenave have increased the pressure by also pleading, in a letter addressed to Bercy, to loosen the constraints.
According to Sacha Houlié (Renaissance), Bruno Le Maire "said to study this hypothesis" of a relaxation. At its last quarterly meeting, the High Council for Financial Stability (HCSF), which associates among others the Ministry of the Economy and the Bank of France, had granted a small gesture in favor of banks and rental investors, by increasing from 4% to 6% the share of loans that a bank can grant freely without having to respect criteria.
This easing has been far from enough, according to real estate professionals and banks. "It was a cold shower," Dubus recalls, adding that professionals expected greater freedom.
The UIC thus makes three proposals: to remind banks that regulated loans, such as zero-interest loans, should be considered as a contribution; allow borrowing terms of more than 25 years for those under 30; and allow a return to a method of calculating the debt ratio that is more favourable to rental investors.
Until 2019, banks could indeed lend more widely, since it was considered that the weight of the credit of a rental investment was offset by the rent received.