Real estate loan rates are starting to fall but buyers remain rare

“When a property was sold in 30 days in 2021 and 2022, it now takes 90 to 110 days,” explains Cédric Redon, manager of the Nestenn real estate agency in Bessancourt, near Paris, to AFP.

He cites falling demand and price gaps that are still too wide between sellers' expectations and buyers' borrowing capacity.

However, the high point seems to have been reached.

In France, a slight drop in credit rates in France began in December, according to the Observatoire Crédit Logement / CSA.

In neighboring Germany too, "the market situation has recently improved for those who wish to buy", explains to AFP Mirjam Mohr, director at the leading German broker in real estate financing Interhyp: loan rates start at a little to fall, and real estate prices have fallen by an average of 8% in 2023 compared to the peak in May 2022.

According to several banks and comparators, credit rates also show signs of falling in Spain, the United States and the United Kingdom, sometimes even since last summer.

This does not prevent strong criticism of the cost of credit that is still too high, particularly in Spain, where bank profits are reaching peaks thanks, among other things, to real estate loans. “It is time to reflect on the integrity and social responsibility of this sector,” said the consumer defense association Facua in a press release.

Where are the buyers?

Around 4% today in France (excluding insurance), property loan rates remain three and a half times higher than two years ago, on the eve of the change of footing of the European Central Bank (ECB).

At the same time, real estate prices have only fallen by a few percent, according to the National Real Estate Federation (Fnaim).

Households applying for a loan are therefore forced to lower their expectations in terms of surface area or neighborhood, to increase their contribution or to postpone their purchase project until better days.

This last option, suffered or chosen, can be seen in the figures.

The production of new housing loans (excluding renegotiations) has, for example, fallen below 10 billion euros monthly since last summer, according to the Banque de France, a first since the beginning of 2016.

The downward trend is "even stronger at the start of the year", testifies the Morbihan departmental director of Crédit Mutuel de Bretagne (Arkea group) Laurent Batais. His bank granted 30% fewer loans in February than a year earlier.

The deputy general director of Bred (BPCE group) Eric Montagne, on the other hand, has noted a slight tremor since January, particularly in the old ones in the Paris suburbs.

Variable rate trap

In Spain, the surge in rates caused the number of property loans granted to fall by almost 20% last year, according to the national statistics institute (INE).

In the United States, the number of resales of apartments and houses has reached its lowest level in 2023 in almost 30 years, according to the National Federation of Real Estate Agents (NAR).

If it hampers the plans of candidates for borrowing, the sudden rise in rates has also directly hit the portfolio of households in debt at variable rates, as is often the case outside France.

With this type of credit, common in the United Kingdom, Sweden or even in Spain and Italy, the borrower sees his rate revised throughout the duration of his credit, both upwards and downwards.

Some governments have reacted to limit defaults: Poland, for example, has put in place a moratorium on monthly mortgage payments from the summer of 2022.

Illustrative image of the article via Depositphotos.com.