Mortgages: borrowing conditions worsen

While mortgage rates continue to rise, with an estimated average of 1.33% in June, compared with 1.26% in May and 1.19% in April, processing times are getting longer. For some households, it's a double whammy as borrowing conditions deteriorate.

Increasingly long processing times

While processing times for home loan applications vary widely from one bank to another, the general trend is towards longer terms.

Sending additional documents, advisors absent due to Covid-19, small delays pile up and can have serious consequences in times of rising rates.

The arrival of summer, with 50% of the workforce on annual leave, is not going to help the situation, especially as some banks have decided to stop cooperating with brokers in order to maintain more comfortable margins, their profits having been eroded by the latest cut in the usury rate in April.

The combination of these factors will increase the backlog, which could penalize some households as rates continue to rise while their application is being processed.

Mortgage rates continue to rise

According to Banque de France estimates, mortgage rates averaged 1.33% in June. In May, the average was 1.26%, and 1.19% in April.

However, the level remains historically low. We're still a long way from the 3% average rates seen 10 years ago, and despite the rise, rates are still below the level of inflation, which was 5.8% in June.

However, they continue to rise inexorably, and are getting closer and closer to the usury rate- the maximum rate that banks are legally allowed to charge.

The usury rate, which is revised every quarter, was lowered in April and then raised on July 1, from 2.43% to 2.58%, or even 2.63% for home loans of 20 years or more, and from 2.44% to 2.60% for home loans of 10 years.

According to industry professionals, the number of applications justifying a rate higher than the usury rate is on the increase, and there is a risk that they will be rejected, making it considerably more difficult for some households to become homeowners. Professionals regret that the usury rate is rising more slowly than the real estate loan rate, and expect a drop in production from September onwards.

For the time being, loan production remains unaffected. In May, the growth rate in housing loans reached a 5-year high of 6.8%.