Stricter conditions for access to mortgages

Each quarter, Crédit Logement / CSA unveils revealing figures on the state of the real estate market. The second quarter of 2022 was marked by tighter conditions for access to mortgages, with rising interest rates penalizing households with a limited budget for borrowing.

Real estate rates continue to rise

Bad news for investors: property rates are continuing the upward trend they began several months ago. The average rate stood at 1.39% in May, then 1.52% in June, before reaching 1.64% in mid-July 2022.

"After rising by 4 basis points (bps) in the first two months of 2022, the increase has been much faster since: +42 bps over the last four months," analyzes the Observatoire.

Nevertheless, the rise in mortgage rates remains measured against inflation, which reached 5.8% year-on-year in June, an increase of 184 basis points.


A context that penalizes the most modest

The current economic climate is not working in favor of borrowers with limited funds for their real estate projects. These borrowers are particularly hard hit by the general rise in prices, which makes it difficult to make ends meet.

Between the decline in purchasing power, the war in Ukraine, which has pushed up the cost of certain building materials, and the recommendation of the French High Council for Financial Stability (HCSF) that the effort ratio should not exceed 35%, access to mortgages has become more restrictive.

From now on, only borrowers with higher incomes and a substantial downpayment can obtain a loan. The average income of buyers has risen by 4.7% in one year, while the downpayment rate has risen by 16.8%.


"Households with low down payments no longer have room on the market," says Michel Mouillart, economist at Observatoire Crédit Logement CSA.

The profile of new borrowers is shifting towards more affluent households with substantial savings.

To be able to borrow, the most modest individuals are forced to take out a property loan over a longer term. 65% of loans are now taken out over a term of between 20 and 25 years, a proportion never reached before.

Rates far from finished rising

The tightening of credit conditions is not confined to France. A report published in July by the ECB shows that mortgage lending conditions in the eurozone tightened in the second quarter, and this trend is set to continue in the months ahead.

In France, the rise in rates is unlikely to stop there. Indeed, they could reach 2.25% by the end of the year if Russia decides to cut off gas to Europe, according to the Observatoire Crédit Logement / CSA.