The end of the mortgage rush, a prelude to a crisis?

Why is real estate credit no longer popular?

The year 2022 was marked by monetary tightening by the European Central Bank (ECB), which translates into lower liquidity and higher interest rates, with repercussions on mortgage loans.

If an individual could still hope to borrow at just over 1% over 25 years at the end of 2021, it would be difficult to obtain a loan at less than 3% today.

The Banque de France recognizes that this rise in rates "of course makes loans less attractive and certain monthly payments too heavy".

But it also considers that "the lower production of mortgage loans, which follows several years of very strong credit growth at very low rates, is now above all explained by the lower demand from households (who) have satisfied many of their requests during these years".

A vision far from being shared by banks and brokers, who question overly strict regulations.

After the usury rate, a maximum rate intended to protect borrowers but accused by its detractors of preventing banks from lending in periods of rising rates, the standards defined by the High Council for Financial Stability are focusing fire.

Since January 1, 2022, French banks can only lend on condition that the effort ratio, i.e. the total amount of housing-related expenses in relation to income, does not exceed 35%, and for a maximum of 25 years (or 27 years in the event of work prior to moving in).

However, establishments have the possibility of derogating from these criteria for 20% of loans, provided that these derogations essentially concern the acquisition of a main residence and aim in a third of cases to support first-time buyers.

What are the consequences for real estate?

"It plays very strongly on demand, particularly for first-time buyers," Thomas Lefebvre, scientific director of Meilleurs Agents, told AFP.

"The effect will be lasting, in the coming years, with a decline in the age of first-time accession", he believes, while anticipating "a very strong gap", between "on the one hand the French who are already owners and who can stay on the market", and "on the other hand those who cannot enter it".

In the old sector, the rise in prices and the number of transactions recorded by notaries began to slow down markedly, after a surge at the end of the confinements, in mid-2020. Trends that will increase in 2023, predict professionals.

"But there is no drop in the desire to buy. There is more of a material difficulty, which does not concern everyone", explains Corinne Jolly, president of Particulier à Particulier (PAP).

In new real estate, on the other hand, sales are plummeting, also weighed down by construction costs which have exploded since the war in Ukraine.

According to official statistics, the number of reservations by individuals with developers and developers fell by more than 30% between the last quarter of 2021 and the last quarter of 2022.

What avenues are being considered?

After having relaxed the wear rate, now recalculated every month until July instead of once a quarter, the authorities are questioning the standards of the HCSF.

The Ministry of the Economy has indicated that it wants to ensure that these rules "do not become an obstacle to access to credit", before a possible change in June.

If the French Banking Federation welcomed the news, judging that the "daily implementation (of these standards) can be complex", the Banque de France was much less enthusiastic.

Recalling that the banks do not use all the margin of flexibility to which they are entitled, the institution judged that an easing "would risk pushing a number of households into situations of over-indebtedness".

For years, the banks have ensured that they are sufficiently responsible to be let loose.

They believe in particular that by taking better account of the rest of the living, i.e. the amount of money remaining in the household for its current expenses, after the payment of debts, they could have "more customers".