Despite a slight increase in mortgage rates, households are still benefiting from favorable financing conditions, as shown by the data in the monthly study by Observatoire Crédit Logement/CSA.
Rates close to historic lows
Average mortgage rates rose slightly in April to 1.17%, compared with 1.15% in March. They are still close to the record low rate reached in November 2019 (1.12%).
Specifically, rates for 15-year loans now stand at 0.96%. Over 20 years, the most common term, the average rate is 1.13%. Only a quarter of borrowers manage to secure a rate below 1%. Most individuals with a 20-year mortgage obtain a rate of less than 1.5%. Finally, for 25-year mortgages, the average is 1.38%. Half of all borrowers obtain a rate of less than 1.5%.
New loan production down
This trend can be explained by higher refinancing costs for banks, but also by expectations of higher risk costs. In any case, containment has had an effect on new loan production. By November 2019, this had run out of steam due to rising prices and the tightening of lending conditions following the HCSF's recommendations. The outbreak of the Covid-19 crisis further worsened the situation, leading to an -8.1% fall in production in Q1 2020. According to the latest Crédit Logement/CSA Observatory, this fall is even more marked for new-build property purchases, at -12.5% in terms of amount and -25% in terms of number of applications.
Recovery in the real estate market promises to be complicated
Although today's real estate market players seem ready to get back to business, there is still some uncertainty as to how households will behave and how many applicants will be forced to abandon their purchase plans. According to real estate estimation website Meilleursagents, 40% of French people are considering postponing their plans for a few weeks or even months. As for sellers (74%), they fear a drop in prices.
Tighter lending conditions could also hinder the market's recovery. A number of brokers are calling for the HCSF's recommendations, which are causing banks to refuse many applications, to be abandoned, and for the rules for calculating the usury rate, which exclude creditworthy borrowers from home ownership, to be reformed. Already contested in the past, this calculation method is no longer appropriate.
The government will most likely have to devote an appropriate stimulus package to the housing sector as early as next year. This could include a widening of the eligibility conditions for the PTZ or a return to the APL Accession scheme, as some professionals are suggesting.