Real estate loan: all the information to borrow in April 2024
Real estate credit conditions are improving significantly thanks to a drop in rates which is slightly increasing the borrowing capacity of households. The granting rules still remain a brake that the financial authorities have no intention of loosening. Another market anomaly, the wear rate is increasing for this second quarter of 2024, which demonstrates its gap with the field, or even its uselessness. Here is everything you need to know to apply for a home loan in April 2024. New reduction in home loan rates Initiated since December 2023, the reduction in borrowing rates continues over the weeks. Good news after the slump of 2023 when the production of home loans fell by 40%. It hit bottom in January 2024 with 7.6 billion euros distributed, the lowest level in ten years. The decline in rates after two years of interrupted growth which brought the average rates over 20 years from 1% to 4.50% (excluding borrower insurance and the cost of collateral) gives renewed optimism to professionals in the sector, and especially to households with a real estate project. Across all maturities, rates are trending downward at the start of April and have lost between 5 and 10 basis points compared to March. The average rate over 20 years is 4%; premium files can expect a significant discount which brings the value down to around 3.55%. Even over the longest authorized period (25 years), the rate oscillates between 3.75% and 4.15% for good profiles. Compared to December, borrowers gained around 12% in borrowing capacity thanks to the downward movement in rates. A loan of €200,000 over 20 years cost €103,672 in interest (nominal rate of 4.50%). Today, for the same cost, you can borrow €228,180. Increase in the usury rate on April 1, 2024 April 1 coincides with the new usury rate applicable for the second quarter of 2024. It is up compared to the previous period regardless of the repayment period: Categories Average effective rate practiced during the previous 3 months Usury rate Q2 2024 Usury rate Q1 2024 Fixed rate loans < 10 years 3.42% 4.56% 4.53% Fixed rate loans ≥ 10 years and < 20 years 4 .6% 6.13% 6.01% Fixed rate loans ≥ 20 years 4.79% 6.39% 6.29% Variable rate loans 4.39% 5.85% 5.63% Bridge loans 5 .07% 6.76% 6.35% Source Legifrance As a reminder, the usury rate is the maximum rate that banks must not exceed to grant credit. This annual percentage rate (APR) includes all the costs which condition the granting of financing, interest, but also other imposed expenses: application fees, guarantee (mortgage or deposit), borrower insurance. This increase in usury raises questions, while interest rates have lost 50 basis points since the end of December, going from 4.5% to 4% on average at the end of March. The usury rates are calculated on the APRs granted the previous quarter. In this case, the legal maximum rates for Q2 are based on loans disbursed in Q1, for offers issued by banks in Q4 2023, when rates continued to rise. The wear rate is therefore out of step with the market and proves its uselessness as it is calculated. This rate is supposed to protect consumers by restraining the banks. However, we see that establishments are taking a proactive approach to lending by lowering their scales given the stabilization of monetary conditions. The increase in usury could have a perverse effect by encouraging them to adjust borrowing rates upwards to optimize their margins. We will therefore have to wait until July to see the decline in wear and tear, a delay of 6 months compared to market reality. Unchanged granting rules The inadequacy of the usury rate proves that the regulation of the distribution of real estate credit makes no sense. To the ceiling rates, the financial authorities have added standards which tighten access to credit. Since January 1, 2022, banks must legally respect two limits: The debt ratio or effort rate must not exceed 35% of the borrower's net income, before tax and loan insurance included. The repayment period is capped at 25 years, or even 27 years for new properties (off-plan purchase) or old properties with renovation work (at least 10% of the amount of the operation). However, you can borrow beyond the standard if you are part of the quota of candidates eligible for the flexibility margin. Banks can exempt themselves from the rules set out above up to 20% of their half-yearly production, mainly for first-time buyers and the acquisition of a residence. For all profiles, the strict supervision of real estate credit requires strengthening one's personal contribution. To stay on track, you must minimize the use of borrowing by boosting your down payment. Even if it has been decreasing since last December, the personal contribution remains at a high level, between 20% and 30% of the amount of an operation. Good to know: this month of April, the new version of PTZ is being implemented. If you are a first-time buyer of your main residence, you may be one of the new beneficiaries of the 2024 zero-rate loan. More municipalities are integrating tight zones (A, A bis and B), which broadens access to this assistance to acquire new housing in collective housing.
