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Real estate: is there a risk of household debt?

Published January 11, 2021 - 2 mins reading time
Bank watch
The Banque de France, in its latest risk assessment report on the French financial system, considers that the situation of households does not currently give cause for concern in terms of debt risk. However, more and more households are renegotiating their mortgages to reduce monthly payments.

A high repayment burden

"Given the scale of public support, the situation of households does not, at this stage, call for major concerns for the stability of the financial system," says the Banque de France in its latest risk assessment report on the French financial system, published on December 31, 2020.

However, the balance is fragile, as 700,000 jobs are expected to be lost by 2021, and partial activity schemes, which have preserved many jobs, will not be renewed indefinitely.

In addition, French households now have a higher repayment burden than Italian and Spanish households. Determined to take advantage of low interest rates, many households have taken out mortgages and consumer loans: today, one in two French households has a loan, accounting for 20% of household debt in the eurozone and 40% of the growth in indebtedness since 2015.

A possible wave of non-payments

A number of experts fear a wave of non-payments, and banks are already showing greater caution in granting credit, as confirmed by a survey conducted by the European Central Bank.

"The drift in the conditions for granting home loans observed in recent years has contributed to making households more vulnerable, but the measures taken by the High Council for Financial Stability (HCSF) in December 2019 and then 2020 aim to stop this drift," believes the Banque de France.

For the time being, however, the recommendations of the French High Council for Financial Stability do not seem to have had any real impact on lending, which is still close to the record level of the fourth quarter of 2019. What's more, more and more households are renegotiating their mortgages, not to take advantage of lower rates, but to reduce their monthly payments.

However, financial regulators say they are keeping a close eye on developments, so as to take the necessary measures in the event of a rise in unemployment.