Rising interest rates, cautious banks… Why is it so difficult to get a mortgage?

The property market has continued to look bleak in recent months. Blame it on interest rates that continue to rise and cautious banks that no longer want to take risks. Much to the chagrin of new buyers.

More and more buyers are no longer there. As interest rates on home loans skyrocket, banks are also becoming more and more reluctant to lend large sums of money to make a purchase.

With 7,000 euros in income for two and an apartment worth about 400,000 euros to finance, Wassim and his wife imagined finding credit easily. Ile-de-France contacted his bank and there, surprise…

“I was told that they no longer provide loans under €600,000. Also, they told me that right now if they give credit, they lose money. We were quite surprised, because I expected to have talks where I could negotiate , have more offers, compare…”, says Wassim.

In another bank he is asked for a significant contribution, the project also falls through. Wassim and his partner had clearly not anticipated these obstacles. “The returns we had at the beginning of the year, in my opinion, were more complicated situations than us and they had managed to negotiate very interesting prices”, laments the buyer.

Despite the couple’s good financial situation, everything has changed in a few months on the banks’ side, explains Olivier Landrevie, the president of the broker CAFPI.

“If they are satisfied with making a direct financial calculation, today they no longer have any interest in taking out mortgage loans. The banks are more selective than they were, both at the level of income, but also in relation to the personal contribution. We have passed the 20% personal contribution bar”, describes Olivier Landrevie at RMC.

Wear percentage and insurance

This grim situation is reflected in the figures. Between July and August 2022, loans granted in France fell by 35% compared to 2021.

As for interest rates for borrowers, Maël Bernier, spokesman for the site Meilleurtaux.com, explains that in one year we have gone from an interest rate of 1% to more than 2.3% over 20 years on average. It’s an extremely rapid increase.”

However, Maël Bernier also explains that “the banks are clearly tightening the screws on loans, but for legal issues, due to the attrition rate, the maximum rate must not be exceeded, which is 3.05% at the moment. This rate is not correlated with the market. Until January, it doesn’t move”.

As a reminder, the usury rate corresponds to the maximum total annual interest that a financial institution cannot lend. If this rate is normally quite protective for borrowers, it is less so during periods of rapid interest rate increases, as is the case today.

The issue of borrowers’ age is also at stake, according to the spokesperson for Meilleurtaux.com. “From the age of 40-45, insurance costs more, which is why it complicates a lot of cases at the moment. (…) Unfortunately, these are people who are totally financeable, with completely bearable debt, but just because they are over 45, their case is rejected”, she clarifies.

Optimism in the 21st century

On the real estate side, as for the president of Century 21 France, we prefer to see the glass half full. According to Charles Marinakis, “there is still activity and 2022 will remain a very satisfactory year, surpassing one million transactions (after an exceptional year in 2021 with 1.8 million transactions). It is not a market in recession, far from it.”

If it is “better to be rich and young” to access a mortgage, Charles Marinakis admits, he believes that there is “still something to buy in France, without problems”.

Furthermore, “prices are clearly falling, gently, but there is no break in the real estate market. There is a necessary adjustment in the market”, continues the president of Century 21 France.

In any case, be brave with new buyers looking for a decent mortgage. For those who want to borrow, the president of the broker CAFPI is not to be discouraged, and to go around the banks without waiting, because interest rates will continue to rise in the coming months.

Margaux Boulte, Martin Cadoret and Alexis Lalemant

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