Mortgage loan: borrowing conditions still favorable

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Mortgage loan rates stabilized at 1.47% on average in April 2018. Borrowing conditions are still favorable. However, if the duration of loans is extended to compensate for the increase in property prices, this is not enough to reverse the loss of household purchasing power.

 

Attractive rates that boost the purchasing power of French households

The Housing Credit / CSA Observatory shows that mortgage rates remained stable, at 1.47% in April 2018. Since summer 2017, they have shown a gradual decline of around 1 basis point per month and are regaining their end of year level. The borrowing conditions therefore remain exceptional.

Another good news for future buyers: competition between banking establishments is intensifying. In fact, the latter have kept high production targets for the current year.

 

Favorable conditions for renegotiation

Favorable conditions for renegotiation

The conditions are also attractive for borrowers wishing to renegotiate their mortgage. It should be noted that it is now possible to change your borrower insurance in order to achieve additional savings. With low interest rates, home loan insurance can account for up to half the total cost of credit.

As a reminder, this cover is required by lending organizations in order to be protected in the event of impossibility of repayment on the part of the borrower. Following the recent decision of the Constitutional Council, the loan insurance market has opened up more to competition. Subscribers can now cancel their insurance each year to replace it with a contract with equivalent guarantees.

 

Purchasing power impacted by rising property prices

mortgage loan

Despite these exceptional borrowing and renegotiation conditions, household power is declining due to the increase in property prices. The deterioration in solvency linked to the rise in property prices observed over the past 6 months was four times greater than what the drop in rates could have absorbed, according to the Housing Credit Observatory / CSA.

This loss of purchasing power is partly offset by the extension of the duration of the loans. In fact, in April, the duration of the loans stood at 220 months on average. Since the beginning of 2014, the terms of bank loans have finally increased by 15 months. For lenders, increasing the duration of loans represents a lever to slow down the slowdown in demand.

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