The rules imposed on banks by the regulator will remain in place for home loans. Since the end of 2019, the High Council for Financial Stability (HSCF) has been recommending that institutions not grant home loans with a debt ratio of more than 33% or a repayment term of more than 25 years.
Home loan production recovers
The French High Council for Financial Stability met in September to take stock of the impact of Covid-19 on the real estate market. Its findings did not prompt it to revise its recommendations of December 20. In fact, the authority noted that real estate loan production had picked up in recent months following the decline recorded during the containment period. In a press release, the HCSF also points out that " mortgage rates remain close to historic l ows". Today, it is possible to obtain a mortgage at 0.95% over 10 years, 1.15% over 15 years and 1.30% over 20 years.
As a reminder, since the end of 2019, lending institutions have been recommended to limit mortgage terms to 25 years and not to exceed the debt ratio of 33%. Most banks have taken these restrictions into account and tightened the conditions for access to credit. As a result, the year 2020 has seen an unusually rapid fall in loan terms (an average of 5 months less since December), and the level of down payments has risen sharply, to over 9% year-on-year in January.
More and more households excluded from credit
The HCSF's recommendations will be reassessed in December. The regulator will be able to draw up a detailed follow-up and an initial analysis of the consequences of these measures, based on the first statements from credit institutions, which will be received by theAutorité de contrôle prudentiel (ACPR) in the coming weeks.
In the meantime, brokers are concerned that these restrictive criteria are having a real impact on the market, with more and more applications being turned down. Under these conditions, the personal contribution often makes the difference. Indeed, for the same salary, those who are able to draw on their savings can borrow less and reduce their indebtedness. Most banks now require a personal deposit of at least 10%. This is seen as additional cover in the event of default. To further protect themselves, lenders no longer hesitate to ask for estimates, particularly in the case of a bridging loan or if the amount borrowed is substantial. It remains to be seen whether there will be a slight easing of lending criteria between now and the end of the year, as banks begin to take into account their business objectives for 2021.