This is an unprecedented fall in the number of mortgages and this will necessarily have disastrous effects on prices. Because if for the moment the market is frozen, it will soon take a thaw!
“The fall in the number of loans granted this summer is spectacular: practically -35% over one year for the months of August and September. In question, files blocked because of the rate of wear.
The rise in real estate interest rates is accelerating and the production of real estate loans is collapsing. In September, the rates granted thus reached 1.88% for all durations combined, according to the latest figures from the Crédit Logement CSA Observatory published on Tuesday. But the most spectacular in these statistics concerns the production of credits, in free fall.
By way of comparison, while the first confinement had started in mid-March 2020, the number of loans granted had fallen by 1.8% over one year in the first quarter of 2020 then by 11.7% over one year in the second quarter of 2020, by 14.9% the following quarter and finally by 18.1% in the last quarter of 2020. It was then necessary to wait for the second quarter of 2021 for the market to really pick up again”.
A level of intake requested that flies away
“The current drop in production no longer has anything to do with the pandemic. It is mainly linked to what Crédit Logement CSA technically calls “the deterioration in the profitability of new loans”. Put simply, the usury rate prevented banks from raising their interest rates as much as they would have liked. The possible credits have become too unprofitable for them. To choose, they have therefore eased off on the distribution of credits.
And for the credits that the banks have nevertheless granted, there too they must adapt. First of all to the climate of uncertainty with a level of personal contribution demanded from borrowers which is increasing at a speed that we had never seen. The increase is 13.8% over the first 9 months of the year compared to the same period of 2021. Loans are also adapting to real estate prices, which remain at extremely high levels. Thus, the average duration of borrowings reached a new historic record (241 months, or 20.1 years) and more than 65% of loans were granted over periods of more than 20 years, again an unprecedented proportion”.
Files that block again with wear
“The increase in the attrition rate at the beginning of October should improve the situation. This was the case for ten days. Unfortunately, we are again in a deadlock situation, because the banks obviously took advantage of the increase in the usury rate to increase their own rate. One of them went for example in just 10 days from 2.20% over 20 years to more than 2.60%. Except that at this level, if we add loan insurance and application fees, we already sometimes exceed the rate of wear and tear, which rose at the start of the month to 3.03% for loans over less than 20 years and 3.05% for loans of 20 years or more.
The neobroker, Bankstore thus notes that again 40% of credit applications no longer pass because of wear and tear, that is to say practically as much as in August. While over the first 10 days of October, we had risen to 85% of requests satisfied”.
to summarize
We are in a period of very sharp rises in interest rates, so usury rates will always lag a war on the real terms of borrowing by households. Everyone knows this, including the Banque de France, which uses this rate of wear as a non-monetary weapon to “break” real estate speculation and demand. It is voluntary and hypocritical at will since nobody says it.
So less credit means less solvent demand. Less solvent demand means a guaranteed fall in real estate prices.
Charles SANNAT
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Source BFM here