Despite the recommendations issued at the end of 2019 by the High Council for Financial Stability (HCSF), the average duration of home loans is lengthening and reached an unprecedented level in October 2020. It stands at 235 months, an all-time record according to figures from the surety finance company Crédit Logement.
Mortgage terms increased by 7 months since March
On December 20, 2019, the Haut Conseil de Stabilité Financière (French High Council for Financial Stability) issued recommendations on developments in the French residential real estate market with regard to the granting of credit. Banks and finance companies were called upon to prevent over-indebtedness by taking two main criteria into account before granting a home loan: a maximum effort ratio of 33%, and a maximum loan term of 25 years.
However, the financial guarantee company Crédit Logement recently published data showing that the duration of mortgages reached an unprecedented level inOctober 2020. It averaged 235 months, compared with 230 months in September, and has increased by almost 7 months since March 2020.
- For the purchase of a principal residence, the average term of a new-build loan is 250 months, i.e. 20 years and 10 months.
- 248 months in an existing home, i.e. 20 years and 8 months.
Longer terms and lower rates to cushion rising house prices
According to Crédit Logement, this lengthening of the average term of mortgages has made it possible to cope with rising house prices since July.
"Faced with rising transaction costs, longer maturities make it possible to keep the effort ratio within the 33% limit, while remaining under 25 years, as recommended by the HCSF," explains the finance company.
Banks also use mortgage rates as an adjustment variable. These continue to fall, to a greater or lesser extent depending on the market sector.
The average rate is 1.21% for the entire real estate market in October 2020, down 7 basis points on June 2020. For new-build properties, the average rate is 1.20%, a drop of 8 basis points, while for existing properties, the fall is more contained: 4 basis points for an average rate of 1.24%.
Furthermore, Crédit Logement notes that despite a rebound in post-confinement demand, from June 2020 onwards, the market has not returned to the same level of activity as before the health crisis.