The drop in the number of loans granted this summer is spectacular: practically -35% over a year for the months of August and September. These are files blocked due to the wear rate.
The rise in property interest rates is accelerating and the production of real estate loans is collapsing. Thus, in September the granted rates reached 1.88% for all durations combined, according to the latest figures from the Crédit Logement CSA Observatory published on Tuesday. But the most spectacular thing in these statistics concerns the production of credits in free fall.
The number of loans granted in August and September 2022 decreased by 34.7% compared to the same 2 months last year. Including July, the number of bank loans granted fell 27.7% in the third quarter of 2022 compared to the third quarter of 2021 (and production volume fell 26.8% year-on-year). “The decline was particularly pronounced in August and September, even more pronounced than during the first confinement”, underlines the Crédit Logement CSA observatory.
In comparison, while the first lock-in began in mid-March 2020, the number of loans made fell by 1.8% year-over-year in the first quarter of 2020 and then by 11.7% year-over-year in the second quarter of 2020, with 14 .9% the following quarter and finally by 18.1% in the last quarter of 2020. It was then necessary to wait until the second quarter of 2021 before the market really picked up.
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An in-demand intake level that flies away
The current drop in production no longer has anything to do with the pandemic. It is mainly linked to what Crédit Logement CSA technically calls “the deterioration of the profitability of new loans”. Simply put, the usurious interest rate prevented banks from raising their interest rates as much as they would have liked. The possible credits have become too unprofitable for them. In order to choose, they have therefore eased the distribution of credits.
And for the credits that the banks have given anyway, they have to adapt there too. First and foremost to the climate of uncertainty with a level of personal contribution required of borrowers rising at a rate we had never seen. The increase is 13.8% over the first 9 months of the year compared to the same period in 2021. Loans are also adjusting to property prices, which remain at extremely high levels. Thus, the average duration of the loans reached a new historical record (241 months or 20.1 years) and more than 65% of the loans were granted over periods of more than 20 years, again an unprecedented proportion.
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Files that block again with wear
The increase in the attrition rate in early October should improve the situation. It was like that for ten days. Unfortunately, we are once again in a deadlock, because the banks obviously took advantage of the increase in usurious interest rates to raise their own interest rates. One of them, for example, went from 2.20% over 20 years to more than 2.60% in just 10 days. Except that at this level, if we add the loan insurance and application fees, we already sometimes exceed the wear and tear rate, which nevertheless rose at the beginning of the month to 3.03% for loans over less than 20 years and at 3.05% for loans over 20 years or more.
As a reminder, the attrition rate is the maximum legal rate at which a business can extend credit. It takes into account both the loan interest, but also the insurance and the administrative fees. It is calculated once a quarter by the Banque de France from the average of the effective rates applied in the previous three months, increased by one third.
The neo-broker Bankstore thus notes that again 40% of loan requests no longer pass due to attrition, that is practically the same as in August. While in the first 10 days of October we had increased to 85% of requests fulfilled.
Among the profiles that no longer exist: young first-time buyers. In the absence of a sufficient contribution, they borrow over longer and longer periods with therefore actually higher interest rates and a greater risk of exceeding ultimately the wear rate. Seniors are also penalized considering the level of their loan insurance. Even some wealthy executives are denied credit.