Property credit: the returns on loans with variable interest rates?

Finally a break in the mortgage market? For the second month in a row, banks appear to be slowing down by limiting interest rate increases. According to the broker Vousfinancer, most banks have frozen their scales for the month of September. The rise in average mortgage interest rates should therefore be held back in the coming weeks.

If at first glance this status quo appears to be good news, the situation is actually much more opposite. Banks are effectively blocked by the usurious rate (the ceiling rate above which banks are prohibited from lending), which is currently set at 2.57% for loans of 20 years and above. As average mortgage rates are already relatively high (1.5% over 15 years, 1.75% over 15 years and 1.90% over 20 years in September according to VousFinancer), banks have very little margin to raise their rates. They are therefore obliged to temporize while waiting for the publication of the new attrition rate, scheduled for October 1.

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A situation that does not help borrowers

In practice, however, this situation does not work out well for the borrowers. “Some banks have temporarily suspended their production of credit pending the publication of the next wear rate, specifies Sandrine Allonier, spokesperson for Vous Financer. The credit market is therefore likely to be sluggish until October and many borrower files will be blocked for several weeks.

The credit market could therefore be freed up in October with the publication of the new usurious rate… but not for everyone. Low-income borrowers may still face a deadlock. “We expect an increase in the wear rate of around 0.2 to 0.4 points, Sandrine Allonier announces. Unfortunately, this increase will be too low to really give all those who want and theoretically able the opportunity to borrow.

The return on loans with variable interest rates?

In this context with loan interest that is limited by the usurious rate, where fixed rates excl. insurance is often more than 2%, which results in the blocking of financing, Vousfinancer notes that some banks are starting to offer loans at variable and mixed interest rates. Variable credit allows banks to offer an interest rate that will change, up or down, over the term of the credit. The exchange rate is generally indexed to the EURIBOR bank lending rate (average rate at which financial institutions lend money to each other on the interbank market in the euro area).

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Mixed interest loans, which allow banks to offer limited fixed interest rates for the first few years of the loan, then higher interest rates for the rest of the loan’s term, could also make a comeback. “These types of credits had almost completely disappeared in recent months with historically low interest rates, but they could easily be back by the end of the year,” says Julie Bachet, managing director of Vousfinancer. With rates 0.4 to 0.6 points lower than fixed rates, they make it possible to pass on files that would have exceeded the attrition rate with conventional credit”. Currently, the number of banks offering variable or mixed rate loans is limited. But the announcement of the next wear rate could well be a game-changer.

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