Real estate credit constituting a product of appeal for banking organizations, competition on the market is always more increased. An interesting context for mortgage applicants who can thus obtain advantageous financing conditions.
Conditions of access to the housing loan still favorable
According to the Household Credit Observatory, in France, 30.6% of owners are in debt. The report prepared by the Cream Bank, at the end of September 2015, announced a total outstanding mortgage loan of 858 billion dollars, an increase of 3.6%.
This favorable context for anyone wishing to acquire real estate was made possible by the historically low level of borrowing rates. And even despite a slight increase, they still want to be very competitive. In September, the average rate communicated by the Cream Bank was 2.23%.
Another favorable point for borrowers, most of the loans granted are at fixed rates (92% of production). The amount of the monthly payment therefore remains the same throughout the repayment of the credit. Regarding variable rate loans, a ceiling has been determined.
The study carried out by the banks is done on the financial situation and the solvency of the applicant, and not on the price of the housing to be financed. To secure his loan, the loan applicant can set up a bond and loan insurance, instead of a mortgage.
Reforms envisaged by Basel: a threat to the market
In France, banks have been resistant to economic shocks. However, new methods for managing interest rate risks are being considered by the Basel committee. Variable rates would in particular be favored over fixed rates. These changes would then upset the French market. Indeed, borrowers would no longer have this current advantage of the security of the current fixed rate loan.
In terms of regulations, the changes proposed by Basel would also risk modifying the use of surety bonds in France. And this alternative brings more security to the owners than a mortgage because a payment incident can lead to the foreclosure of the financed housing.
Finally, there is a ceiling on the leverage effect (ratio between equity and size of the balance sheet). And with a reduced financing capacity, banking organizations will most certainly limit the volume of loans granted.