Rates that have never been so low, loan durations that span decades and borrowers who are rejuvenating: here is the table of French mortgage loans, the general amount of which was unprecedented last year.
This is the indicator that most clearly shows how easy it is to borrow to buy real estate. On average, according to figures from the Crédit Logement / CSA observatory, which refer, the average interest rate was 1.13% at the end of 2019 in France.
These rates have been extremely low for years, reflecting monetary policy very favorable to the credit of the European Central Bank (ECB). But they reached a new milestone last year, repeatedly falling to an unprecedented level. For now, the record to beat is 1.12%, reached in November.
At this level, the rates are broadly similar to inflation. Theoretically, this amounts to saying that one can almost gain purchasing power by borrowing, but this idea must be put into perspective. Indeed, the figures of CSA / Crédit Logement do not take into account loan insurance, which is systematically requested by the bank and adds to the individual’s rating. Historically long durations Banks, which can hardly lower rates that are already almost zero, use another variable to make their loans more accessible. They lengthen the repayment period.
This amounted to 232 months, i.e. 19 years and four months, on average at the end of 2019, still according to Crédit Logement / CSA. Again, this level is historically high.
In this context, the financial authorities asked the banks at the end of 2019 to avoid granting loans of more than 25 years. Even if it is still only a recommendation, the authorities do not rule out moving to more coercive measures.
Another criterion on which the banks play: the personal contribution, that is to say the sum immediately requested from the borrower to secure the loan, is increasingly low. It represents on average 14% of the loan amount, the lowest proportion for more than 40 years.
A record total amount
As a result of these historically favorable conditions, the sums borrowed for a property purchase have never been so high in France. According to the Banque de France, the total amounted to 1.071 billion euros last November, an increase of almost 7% compared to a year earlier.
Admittedly, figures from CSA / Crédit Logement show a slowdown at the end of last year, but the situation should not turn around in 2020. The rating agency S&P Global Ratings expects an increase of 5% this year.
Bad sign for the banks, according to the Banque de France, more than a quarter of new mortgage loans corresponded in November to renegotiations of existing loans, in a context of fierce competition between establishments.
These renegotiations, which had peaked in 2017 before marking time, have been on the rise again for a few months.
Younger borrowers
Who jumps on these conditions so favorable to the loan? First the youngest. According to CSA / Crédit Logement, more than half of the borrowers were under the age of 35 for a new home purchase last year.
The proportion is up compared to the previous two years, as is the case for older dwellings where it is nevertheless slightly lower (47%).
Not all buyers aim to find accommodation themselves. According to the broker Cafpi, more and more mortgage loans relate to a rental investment, in other words a home bought to rent from someone else.
According to his figures, among the mortgage loans made by his customers in December, 17% were for rental investment, against 9% a year earlier.
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