Mortgage: A Favorable Wind

The favorable rates offered by financial institutions are giving a new dynamic to the real estate sector. Investments in real estate are experiencing an encouraging rise, a situation largely favored by more flexible mortgage lending conditions.
How can this particular context be explained and what are the prospects?
The answers in the following lines.

Access to Mortgage Credit: Current Situation

Access to property ownership has never been so within reach for taxpayers. They can count on banks that are more generous and quicker to unlock the funds they need to finance the acquisition of their assets.

Overall, the current situation is optimistic, with very low interest rates generally remaining below 1.5%. While 2019 was a benchmark for low borrowing rates, data collected at the beginning of 2021 indicates an even more significant drop.

For illustrative purposes, according to data provided by the CSA Housing Credit Observatory, in May 2021, an average rate of 1.07% was observed, a revealing low point of the general state of the market.

Favorable Rates: The Impact of Financial Institutions

The fact that rates have remained attractive for several years may be surprising, but it is perfectly understandable. With the onset of the health crisis, the savings efforts of French households have increased, which has contributed to a major rise in their borrowing capacity.

Between those purchasing their first property and those continuing to expand their real estate portfolio, banks have seen credit requests surge.

This situation has contributed to a strong competition among financial institutions, which have been forced to lower their borrowing rates to maintain their competitiveness.

The Impact of Measures Taken by the HCSF

The HCSF or High Council for Financial Stability is not foreign to the current dynamics of the real estate sector. Indeed, through various measures and recommendations, it has relaxed the conditions for accessing mortgage credit.
Notably, the maximum debt-to-income ratio has been increased from 33% to 35%. This new threshold is accompanied by a limitation on the duration of the loan, now set at 25 years.

In anticipation of potential constraints that may arise from this limit, a deferment of amortization of up to 2 years may be applied.

Thanks to this range of measures, the demand for mortgage credit is experiencing quite sustained growth.

Mortgage Credit: What Are the Prospects?

Supported by fiscal measures and various incentive schemes, the real estate sector retains its appeal. It is true that the dynamics of real estate investments are not the same across all regions, but they remain encouraging.

Even though current favorable rates are expected to change, a rather controlled increase is anticipated, which will help stabilize mortgage credit demands.

However, it should be noted that higher rates are likely to jeopardize the real estate projects of the most modest households, as their maximum debt levels will be reached more quickly.

Therefore, to find suitable financing solutions tailored to one's profile, it is recommended to consult a professional.