Many banks significantly raised their lending rates in April, while new loan applications have fallen by 72% since the beginning of the year. This trend is unlikely to help the sector's recovery.
Increases of up to 0.70% depending on profile
In April, some fifteen banks increased their rates significantly, according to several brokers. While most of these increases are between 0.15% and 0.25%, others are as high as 0.70% for the lowest profiles. Average rates are 1.20% for 15-year mortgages, 1.40% for 20-year mortgages and 1.60% for 25-year mortgages.
According to the banks, the country is entering a recession, and mortgages now represent an increased risk, justifying the rate variations. These increases can also be explained by the low level of competition on the market. Several establishments have shut down their operations. Those that have maintained their services can therefore afford to increase their lending rates.
Loan applications on the decline
The broker VousFinancer recorded a 72% fall in loan applications and a 58% drop in the number of files sent to banks during the first three weeks of the lock-up. While the real estate market remains in standby mode for the time being, the government has recently cleared up a few difficulties that could revive it. Indeed, a decree published on April 4, 2020 authorizes the remote signing of deeds of sale. This measure should enable notaries to get back to work to conclude current sales files. However, these professionals can still refuse to use this system if they consider that it does not sufficiently guarantee the security of legal acts.
Longer processing times
In the midst of the coronavirus crisis, processing times are getting longer. The same applies to loan renegotiations, which are considered a lower priority than new applications. VousFinancer found that one bank had increased the validity period of its loan offers from 30 to 90 days. An ordinance dated March 25, 2020 also provides for an extension of deadlines for suspensive conditions to give borrowers time to obtain a real estate loan.
Future developments in the mortgage market will therefore depend mainly on the length of the lock-in period. If the fall in demand continues into September, banks could try to revive the market by keeping rates low. But some players fear that the market will take off again with a time lag, as employees on short-time working, shopkeepers and the self-employed whose incomes are falling will have to wait to apply for a home loan until they are back on a satisfactory financial footing.