2023-11-03 11:00:29
Real estate credit: a financing cost that has soared
The competitive mortgage sector is under increasing pressure. With an average rate of 4.12% for property ownership, both new and old, buyers face a financing cost which has soared by 177 basis points in just one year. In comparison, the previous year saw an increase of only 84 points. The cause ? A restrictive monetary policy responding to galloping inflation, where the ECB (European Central Bank) raised its main refinancing rate to 4.50% at the end of October 2023. Banks, seeking to preserve their margins, have no other choice than to pass these costs on to borrowers.
The consequences are direct on the production of new credits, the dynamism of which is shaken. Although the fall was previously contained, it has not managed to reverse the downward trend that began several years ago. Bank profitability, although improved since June 2023, does not compensate for the reduction in demand for loans, particularly with borrowers facing increasingly rigorous financial conditions.
Loan duration reaches an average of over 21 years
The increase in rates has a direct and significant impact on the borrowing capacity of households with a reduction of 16.7% in their borrowing capacity since December 2022. The extension of the duration of loans, which had previously attenuated the rise in rates, is now proving insufficient to counterbalance the recent surge. This deterioration in borrowing conditions places many home ownership projects on hold.
Faced with these challenges, the market reacts by adapting the structure of credit production. The lengthening of loan durations is increasing, with an average duration now reaching more than 21 years, a level rarely observed. This strategy, although necessary, is not enough to maintain the balance between rising property prices and increased requirements for personal contribution. In October 2023, nearly two thirds of home ownership loans are granted for terms of 20 to 25 years, reflecting a distortion of the market which is adjusting to new economic realities.
1699017871
#rates #increase #cost
