The quarterly report of the CSA Observatory / Astro Finance on the evolution of mortgage loan rates, already announced the color. The downward trend continued, and was even expected to increase in October. Once is not custom, these forecasts were correct, because the average fell to 2.50% last month. These are in any case the findings of the observatory, because in reality the best profiles can even borrow cheaper. The best news for the real estate market is undoubtedly the return of first-time buyers, who can now become owners more easily.
Real estate rates go crazy
An ever lower average
While the average rate observed by the CSA and the guarantee body Astro Finance for September 2014 was 2.59%, October reserved a little surprise for borrowers. At 2.50% on contracts signed last month, the market is 9 points less from one month to the next. 2 years ago, in January 2012, the average nominal rate could be around 4%! Since January 2014, the average has dropped by 58 basis points.
To continue in the comparisons, the nominal rate observed on old real estate in October is 2.48%, while it was 3.08% in December 2013. The difference is slightly more moderate on new real estate, with 2.53% in October against 3.08% in December 2013. On the works market the gap is widening, the average rate drops to 2.51% in October, whereas it was at 3.12% in December 2013.
Today no one borrows more than 4% (1% of contracts signed). The vast majority, if not all, of the contracts are at nominal rates below 3.5% (98.9%).
The trend that was observed during the third quarter of 2013 therefore continues.
We mainly borrow over 20 – 25 years
In October, the majority of signed home loan contracts were signed for a period ranging from 20 to 25 years ( 34.3% ). The 15 – 20 year bracket follows behind ( 28.2% ), the third position being taken by long-term repayments, ie 25 to 30 years ( 17.6% ). However, there remains a high proportion of contracts under 15 years ( 19.2% ), and almost no borrowing beyond 30 years ( 0.8% ).
More expensive home loans?
Due to the fall in interest rates, mortgage loan simulations show that many households can today fall below the ceiling debt ratio of 33% requested by banks. Curiously, we note that the average duration of the loans is identical from September to October: 208 months, for a higher cost. While in September 3.75 years of income were necessary to pay the cost of real estate financing, in October it will take 3.80 years, for the same duration. However, analyzes suggest that this difference is due to the slow increase in household income.
The CSA / Astro Finance observatory notes that the cost of credit has increased by + 0.6% in 1 year.
First-time buyers are back
It seems that young households are among the first beneficiaries of the best borrowing conditions. The report notes that “the movement of deterioration in the flow of first-time buyers of young and low-income households seems to be stopped”. If the average duration of repayments has increased by 4 months since spring 2014, this effect would therefore be caused by the return of young borrowers to the property market.
In October, the average duration of repayments was 220 months in the old, and 234 months in the new. An additional sign of the return of the first accession is the solvency indicator. If the level of personal contribution deteriorates again from one month to another, it is however in sharp decline over 1 year. At the end of October, the solvency indicator of the demand made was -2.5% over 1 year, against -5.5 % in 2013. Analysts thus note that the credit conditions make it possible to erase the rise in the cost of operations, the latter probably being linked to the lack of wage development.
In reality, rates are even lower
The figures published here relate to mortgage loans guaranteed by Astro Finance, and are calculated as an average. In reality the best profiles can get even lower rates. Several factors come into play, starting with the amount of the contribution and the sustainability of the professional situation.
The executive profile remains the darling of banks, particularly if they are second-time buyers. The capital gain realized on the sale of their current housing effectively allows them to benefit from a substantial contribution. However, certain profiles of young first-time buyers benefiting from a sufficient personal contribution can also obtain rates below the market average.
The rates are lower, how to profit?
Renegotiating a mortgage
Today, the renegotiation of mortgage loans is on the rise. The principle is simple, the Consumer Code authorizes any borrower to redeem his debts. However, some households took out their home loan in 2010 and before, for rates going beyond 4%.
Today they benefit from a history of monthly payment, a certain amount of capital repaid, and often savings. Good Finance brokers summarize their banking profile and present it to partner banks. The latter express their desire to buy the home loan from owners for less, in exchange for a domiciliation of account.
Because today the strategy of the banks consists in betting on the sale of banking services, in order to favor the restoration of their equity.
The prices of old real estate are adjusting to the downside, and developers of apartments and houses are forced to make efforts to sell their stocks. The property market report of the General Commission for Sustainable Development shows that the stock is currently over 103,000 units.
In addition to the price factor, the renewal of the PTZ + could very well represent serious help for first-time buyers. Housing Minister PS predicts that 70,000 PTZ + could be distributed within a year. A good opportunity to become a homeowner, taking advantage of mortgage loan rates which, according to some analysts, could remain at this level for another year.