Mortgage blocked by usury 2022: what to do?

Property credit at the end of 2022: attrition still blocks the market

In less than a year, mortgage interest rates have doubled, a spectacular increase that can be attributed to the deteriorating economic and monetary context and which, unfortunately, is set to continue. However, it is not so much this unprecedented increase that is disrupting the property market as it is the attrition rates, the beneficial effects of the October 1 revision having already been wiped out. Continued rise in interest rates Since March last year and the outbreak of war in Ukraine, mortgage interest rates have started to rise again. The increase in inflation at the end of 2021 already suggested an upward movement, but the geopolitical situation has accelerated the phenomenon. Around 1% (excluding mortgage insurance and collateral), the average interest rate over the classic 20-year term easily exceeds 2%. The new rate hike in October 2022 was further deepened in ten days with an overbid of 30 to 40 basis points. Currently we have debt at around 2.20% to 2.30% on maturities of 20 and 25 years, average rates given to good files. For others, the loan offers are much less generous. And it’s not about to stop! Between the crazy streak of inflation putting heavy pressure on central banks and the rise in 10-year OATs, commercial banks are forced to quickly adjust their interest rate plans. In the wake of the Fed (US central bank) raising its policy rates very significantly, the European Central Bank is also forced to raise its own rates to curb inflation and regain €/$ parity. After an initial increase of 50 basis points at the end of July last year, the ECB added 75 points in early September and plans another 25 points in two phases, on October 30 and December 15. The refinancing rate for commercial banks will at best be 2% at the end of the year, against 0% for ten years. At the same time, the yield on the 10-year French government bond yield (10-year OAT) reached its highest level since 2013 (around 2.80%). So many reasons why interest rates are rising so fast in 2022. Wear and tear, always wear! The problem does not come from the increase in debtor rates, but from the drastic standards that the High Council for Financial Stability has imposed on the banks for two years, and the regulation of usury. For good measure, HCSF adopted grant rules that became legally binding in January 2022: the debt ratio or leverage ratio cannot exceed 35% of pre-tax net income, mortgage insurance included; the repayment period is limited to 25 years (up to 27 years when buying in the new or in the old with major works, when the enjoyment of the property takes place after the release of the funds). Banks are therefore obliged to comply with these rules under penalty of administrative sanction, and they adhere to them, while having the option of deviating from them on the margin for first-time buyers. Subject to this strict supervision, they are also limited by usury, a system intended to protect borrowers from possible bank abuse. The wear rate, which should not be eliminated, must now respond to new logic given the incomprehensible blockage it has maintained in the market for long weeks. The revision of the values ​​for the 4th quarter of 2022 gave a short respite to the borrowing households, an increase in usury is now insufficient in light of the increase in interest rates. A real estate market stalls By increasing the impairment rate by 48 basis points for loans with maturities of 20 years or more (3.05% in Q4 2022 vs. 2.57% in Q3 2022), the Banque de France has allowed the release of ​​a few files, but the option window closes as quickly as it opened. The market lacks oxygen and is suffocating, not because of the increase in debtor rates, but because of the stagnation of usury in the presence of this rapid development. Unfortunately, we have to hold out until December 31, 2022, and in the meantime, the lending rates don’t stop there. Brokers expect them to reach 3.50% in 2023, which remains a favorable level for property purchases that we were used to before 2016. This implies a reform of usury without delay or risk closing the credit tap, a radical decision, which some banks have already taken in order not to lose money. The award conditions, combined with the backlog of usury, are now driving Pinel Law investors out of the market and dissolving solvent candidates. The impact of DPE is also on track to deplete rental inventory; investing in 2023 will be a challenge. Households’ housing journey is fraught with obstacles, pushing the concept of a France of owners even further. The picture would be completely bleak if it weren’t for the renewed interest in PTZ (Zero Rate Loan), this access device reserved for first-time home buyers. The sharp increase in debtor interest rates will make it more attractive in 2023 because PTZ reduces the debt ratio by financing up to 40% of the amount of the operation for free. While the deduction of loan interest reappears, first-time buyers may have more facilities to realize their real estate project in 2023. However, if the future of PTZ as Pinel in 2023 was not suspended!

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