Rapid increase in the average rate, as in July
After a rapid increase in July (+18 basis points), the increase in the average lending rate had been moderated in August, then in September by an attrition rate that was slightly revalued for the 3rd quarter, after being held at a low level during the period. spring.
With the significant appreciation of the usurious rate that took place in the 4th quarter, the increase in the average lending rate that took place in October (+17 basis points) is comparable to that in July. However, the deterioration in the profitability of new loans has worsened.
This was already seen with the increase in the ECB’s main refinancing rate at the end of July: the further increase in mid-September hurt profitability a little more. Thus, the new production of credits, the dynamics of which had already been changed (weakening of demand, decrease in supply), could not really succeed in returning.
Since December 2021, the average rate has increased by 99 bps in the market as a whole, the increase has been 102 bps in the works market (2.03% in October), 100 bps in the new market (2.08% in October) and 98 bps in compared to the former (2.05% in October). And the loan rates have all increased by at least 100 bps, regardless of their duration at the time of the grant.
All categories of borrowers have been concerned, although the increase was slightly slower for the most modest borrowers: + 95 bps for borrowers with less than 3 SMIC income, against + 107 bps for 5 SMIC and more.
The extension of the duration no longer preserves the solvency of the buyers
In October 2022, the average duration of loans was 244 months (261 months for accession to new and 254 months for accession to old) according to figures from the Crédit Logement CSA Observatory.
The extension of the average duration of loans granted continued in October. The duration now establishes itself at a level never seen before.
But this extension is no longer sufficient to offset the consequences of the increase in house prices or to mitigate the consequences of the increase in the required personal contribution.
Since the end of spring, it has merely prevented an even faster decline in the production of loans, but with an efficiency that is eroding as loan rates rise.
The share of the longest loans in the entire production has been slowly decreasing since the end of last spring. In October, 64.1% of bank loans for home ownership were thus granted for a period of between more than 20 and 25 years.
The number of loans granted is still falling
In a context of strict application of the recommendations of the HCSF, the number of loans granted weakened from the beginning of 2022, as demand responded to the deterioration of its purchasing power, while credit conditions no longer improved. .
The outbreak of war in Ukraine and inflationary pressures, which directly affected credit rates, reinforced the decline in household morale. This additional shock turned what might have looked like a simple slowdown into a market downgrade.
The revaluation of usurious rates that took place from October 1 has certainly allowed for an increase in mortgage rates: but the new phase of raising ECB rates has weighed on banks’ margins. The supply of credit could therefore not rise sufficiently, in contrast to what is usually seen at the start of autumn. And the decline in loan production continued: In October, quarterly production fell by 32.1% year-on-year, and the number of loans fell by 34.3%.
Under these conditions, the production of loans measured in rolling annual terms had decreased by 10.7% at the end of October year-on-year (against +0.5% a year ago at the same time), and the number of loans fell by 12.9% (+ 1.1% a year ago at the same time).
A shift in demand towards higher income customers
With the strengthening of the requirements for a higher down payment, the borrower profile is changing.
Borrowers’ incomes are rising faster than before (+4.0% for the first 10 months of the year, year-on-year, compared to +2.0% in 2021). With the strengthening of the requirements for a higher personal contribution, the demand has changed. And the decline in banking supply caused by the deterioration of the profitability of new loans has affected a more modest clientele.
And at the same time, the level of the personal contribution is rising very quickly (+10.5% for the first 10 months of the year, year-on-year, after +13.3% in 2021). Contribution rates for households still in the market have increased significantly since 2019, to reach high levels in light of the requirements of the French banking regulators. But this development weighs on the dynamics of the credit market. It illustrates the difficulties in implementing real estate projects that are supplied by a large number of households whose personal contribution is now considered insufficient.