Banks called to the rescue to wake up the real estate market

At 129,5 billion euros, the amount of new real estate loans granted fell last year to a low point since 2015, according to data from the Banque de France and the trend observed in recent months is still downward. .

Government leads

To "restore real estate purchasing power to the French", Mr. Béchu announced on January 31 during his wishes that he wanted to "examine new financial tools such as +finally+" loans.

A bullet loan is not new, but today remains very little marketed by banking establishments.

This particular credit dissociates the payment of interest and the repayment of capital. The borrower pays the interest on the loan (and insurance) each month and repays the capital only once, at the end of the loan.

This type of loan can present certain tax advantages for rental investors. On the other hand, it presents a risk if the borrower counts on the resale of the property to repay the loan, the price of which may fall over time.

Mr. Béchu, however, mentioned a limit on the share to be reimbursed in fine, at "20, 30%" he explained on February 4 at the microphone of RTL. “This makes it possible to obtain lower monthly payments or to borrow more for more,” he adds in the edition of Le Parisien dated Monday.

The minister also puts on the table a variant, the mortgage loan, which asks the candidate for the loan to pledge real estate in order to provide additional guarantee to the bank.

He draws on the Swiss example, "where it works very well", he assures in the columns of the daily newspaper.

What do the banks think?

In a statement sent to AFP on Monday, the French Banking Federation (FBF) provided details and expressed some reservations on these types of credit.

The professional federation first points out that the Swiss economic, fiscal and legal context is different and that it is appropriate to remain cautious in the comparison exercise.

“A credit in fine is by construction more expensive in interest than a depreciable credit,” she emphasizes.

“In France, bullet loans can sometimes be appropriate in certain property or rental investment transactions and very rarely in property ownership,” adds the FBF.

The banking lobby, however, seizes the hand extended by the minister and "will of course discuss with the public authorities to study measures which would improve access to property for the French".

Many players in the real estate market, including banks, see the situation being resolved by a drop in prices, which is currently very timid.

Measures already announced

The promotion of this type of credit would be part of a broader framework of measures intended to give a boost to the real estate market.

Strongly encouraged by the Banque de France and Bercy, French banks will already set up a system for “reviewing” refused real estate loan applications.

This second examination will be carried out at the request of clients and will concern financing files for primary, secondary residence or rental investment. It will be active during February until the end of December.

The rules governing real estate credit, reviewed every quarter by the High Financial Stability Council (HCSF) bringing together the Banque de France and the Ministry of the Economy, were also marginally adjusted during its last meeting on December 5 .

The main principles nevertheless remained set in stone: banks do not have the right to sign a real estate loan if the total amount of borrowers' expenses related to housing exceeds 35% of their income (effort rate), nor for a period exceeding 25 years.

Illustrative image of the article via Depositphotos.com.