Mortgage loans: despite their upward trend, rates are still attractive.

Mortgage loans: despite their upward trend, rates are still attractive.

For the time being, interest rates remain attractive and continue to boost the stone market despite the rise in rates initiated last December. But how long will this situation last? What threat hangs over the current market dynamics? What are the prospects by the end of the year? Analysis of the Housing Credit / CSA Observatory, Good Finance and notaries in France.

Nothing to worry about at the moment.

Nothing to worry about at the moment.

Despite a reversal of the curve observed since December 2016, mortgage rates for individuals remain attractive in the first quarter of 2017, according to the Observatoire Astro Finance / CSA, in its latest study published Tuesday, April 25. The rise in rates is neither brutal nor strong. And household demand remains strong. According to the Credit Housing Observatory / CSA, the average rate for all durations, excluding insurance, stood at 1.51% in March 2017.

Despite the slight increase in rates, they still remain at a lower level than the rates charged a year earlier. In fact, in March 2016, households borrowed at 1.92%! Note that this attractive level of average rates established at 1.51% corresponds to the level observed in July 2016.

Rates at less than 1% over 20 years: it’s over!

Rates at less than 1% over 20 years: it

According to the new edition of the Youfinance Barometer of “bank darlings”, the lowest credit rates go up slightly to reach   at best 1.05% over 20 years against 0.90% in January. On the other hand, good profiles generally still drop rates between 1.20% and 1.60%, conditions which remain very attractive and stable compared until January 2017.  “Most banks achieved credit production in the first quarter ahead of their objectives.

However, they continue to be in strong competition on the best profiles – the most profitable, at these rate levels – and are thus ready to grant them significant rate reductions to capture them. The rate spreads widen according to the profiles, while the conditions for granting loans have not changed much. ”   analysis Alex Bruner, Director of Bank Relations at Good Finance.

“In the current context marked by strong activity in the first quarter, banks have tended to favor the most profitable profiles, with high income levels as a priority,” observes Alex Bruner. “It is the income of buyers that will constitute the resources of the banks of tomorrow and allow them to generate future income when setting up a long-term relationship; while the contribution only reduces the amount of the loan, even if it partially secures it ”. 

Almost half of the profiles recorded in the April barometer did not have any contribution, whereas in January 95% had at least 10% of contribution. But this is not the norm. “Overall, the darlings of banks remain couples on permanent contracts with a salary of more than $ 4,000 for two and 10% contribution.

This is mainly on a case-by-case basis, for high-potential profiles or first-time buyers of less than 35 years that banks agree to finance acquisitions without contribution, by evaluating the quality of the good and the evolution of the professional situation to come”. Thus, the share of loans without contribution at Good Finance is currently 9% against 12% in the 1st   quarter 2016.

Still attractive credit rates: at best between 1.05% and 1.21%!

Still attractive credit rates: at best between 1.05% and 1.21%!

As part of the acquisition of a main residence in Nantes, a second-time purchaser, divorced with two children was able to afford a property for 1,434,000 euros, without contribution, thanks to comfortable incomes amounting to 40 000 euros per month at an exceptional rate of 1.21% over 20 years excluding insurance.

Conversely, a second-time single person earning more modest incomes of 2,080 euros per month was still able to buy a new new main residence for 300,000 euros thanks to a substantial contribution of 177,000 euros. This 39-year-old second-time Parisian also benefited from an attractive rate of 1.20%.

Even better, a 30-year-old single from Bordeaux got a record rate of 1.15% to buy his first main residence for 400,000 euros. It must be said that he earns 10,000 euros per month and made a contribution of 40,000 euros.

Among Good Finance’s clients, the best rate was granted to a couple from Cannes as part of a loan buyout by the competition, in the amount of 700,000 euros: 1.05%! These forty-something people earn 10,000 euros a month for two.

Real estate market boosted by still attractive rates

For the time being, the still attractive rates continue to support the market despite the rise in rates initiated last December. “This slow ascent does not discourage buyers” commented the notaries of France in their last note of conjuncture. As proof, after a very dynamic year in 2016, the number of sales of old homes continued to grow. Thus at the end of February 867,000 sales were made over a year, an increase of 7.7%, thus pulverizing the historic record of 848,000 transactions established last year. Taking into account the preliminary sales contracts recorded by the notaries of France, the prices of old apartments should have increased by 4.3% and those of old houses by 6.1%.

Rising house prices more penalizing than rising rates

”   The cost of operations is increasing sharply in all markets, ”notes Mike Gart, author of the Credit Housing Observatory / CSA study. ”   Never has a winter been so dynamic   In terms of production, without even counting credit repurchases: almost 30% increase in the 1st quarter of 2017 in credit production and + 22.4% in number of loans. As a result, the production of loans guaranteed by Astro Finance reached $ 34 billion in the first 3 months of 2017.

The balance of the old market remains threatened by a possible upward trend in rates.

The balance of the old market remains threatened by a possible upward trend in rates.

According to Good Finance, a few days before the 1 st   around the presidential election, the outcome of which remains uncertain, no one can risk forecasting the likely development of interest rates.  “The evolution of financing conditions in the coming weeks will depend on the evolution of the 10-year OAT which has remained at less than 1% since the beginning of April, but also on the commercial policy of the banks, which will remain more or less offensive, depending on demand, which could be impacted by the result of the presidential election and the possible measures announced. We are currently in an artistic blur, even if the fundamentals remain good thanks to the level of rates, the Pinel system and the zero-rate loan, three levers that continue to supply the market ”   concludes   Mr. Lee, president of Good Finance.

According to the forecasts of Mike Gart, author of the study by the Observatoire Astro Finance / CAF and professor of Economics at the University of Paris Ouest, “average mortgage rates should land at the end of the year at 1.75 % “. Provided that “the 10-year OAT rate is around 1.1% and that the refinancing rate of the Cream Bank remains at 0%,” said the economist.

According to the notaries, “the element to fear for the old real estate market would be a disproportionate increase in interest rates, which would hamper the financial capacity to buy and upset the current balance. A hypothesis that could materialize in the event of France leaving the European Union and the single currency, ”point the ministerial officers. In short, clearly, a catastrophic scenario is looming on the horizon if Marine Le Pen were ever elected and if she implemented her will to get France out of the EU.

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