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Home loans: can we do without borrower’s insurance in 2022?

November 2022 mortgages: interest rates at the highest in 7 years

The race for mortgage interest rates continues. For the first time since the start of 2016, lending rates rose above 2% in October, according to the latest data from Observatoire Crédit Logement/CSA. They have doubled in a year, a sign of a problematic monetary context. To this very significant increase, which will be reinforced, comes the problem of attrition, where these two factors together cause a decrease in the production of loans. Average rate above 2% In October 2022, the average rate for all terms combined was 2.05% compared to 1.88% the previous month (excluding borrower insurance and collateral). The increase is significant, comparable to that observed in July last year. This rate is higher than that observed in the first quarter of 2016 (2.01%), a period when the slow decline in interest rates began. Here are the details of the rates by duration, compared to the values ​​observed since October 2020: Rate over 15 years Rate over 20 years Rate over 25 years Average rate October 2020 1.02% 1.16% 1.42% 1.21% December 2020 0.97% 1.10% 1.35% 1.17% October 2021 0.84% ​​0.98% 1.14% 1.04% December 2021 0.86% 0.99% 1.13% 1 , 06% October 2022 1.92% 2.04% increase in Créement 2.06% log 2.06% log 2.06% log in August and September 2022 had been slowed by the low revaluation of interest rates in the third trimester. The increase in usurious rates on October 1 encouraged the banks to grab more points and raise their scales without doing so as a result of monetary developments, still due to usury’s brake. Mortgages are no longer profitable The profitability of new loans, that is the margin that banks can generate by lending to individuals, has deteriorated rapidly since July 2022, following the decision by the Central Bank of the European Union to raise its key interest rates in an attempt on braking. free-running inflation. The refinancing rate, which is the cost of money for commercial banks with the European institution, has gone from 0% (until July 2022) to 2% since 27 October. We see in the table above that the average interest rate over 20 years has more than doubled since December 2021. This unprecedented increase forces borrowers to take on debt for longer periods. In October 2022, the average term of home loans was 244 months, compared to 211 months in the first quarter of 2016, when interest rates were at the same level. According to the bank scales received by brokers, rates for November 2022 are close to usurious, fluctuating between 2.20% and 2.35% over 20 years and between 2.35% and 2.50% over 25 years. At these most common maturities, the interest rate is set at 3.05% for the last quarter of 2022. We could soon have interest rates above 3% and the European Central Bank’s monetary policy will become less and less accommodative until inflation has returned to a level in accordance with the common rule (2%). We have to go back to 2013 to find similar refinancing costs. At the time, the mortgage interest rate was around 3.50% and the attrition rate was over 5%. While home loans to individuals are the banks’ loss leader, today they are no longer profitable, prompting some companies to close the floodgates pending regulation of the maximum legal rates more in line with the land. Usury blocks the real estate market The increase in debtor interest rates would not be problematic if it did not highlight the inadequacy of usurious interest rates. By virtue of a calculation method that is unable to take into account a sharp increase in interest rates, usury is under fire from brokers, including from banks, which recently floated the idea of ​​accelerating the rise in usury in 2023 to base the calculation on the loan offer and not on the credits actually granted. Are we heading for a reform of the attrition rates in 2023? It would be legitimate to believe so, following the recent statement on BFM Business by housing minister Olivier Klein, who said he favored a calculation of wear and tear on a shorter basis. As a reminder, the Minister of Economy, on a reasoned proposal from the Banque de France, has the legal means to introduce transitional measures with regard to usury in the event of an unusual variation in the cost of bank resources, and this, over a period of up to eight consecutive months (Article L.313-5 of the Monetary and Financial Act and Article L.314-8 of the Consumer Act). Getting a mortgage loan in 2023 will be an insurmountable challenge if the financial authorities do not quickly initiate the usury reform. Over a year, the production of housing loans fell by 10.7% in terms of amount and by 12.9% in number of loans.



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