In February 2021, mortgage rates are again trending down, mainly in institutions that had not lowered their rates in January. Gradually, banks are starting to change their credit granting conditions following the details provided by the HCSF in its notice of January 27, but while remaining vigilant in an uncertain economic context.
Rates still falling in February 2021
The downward movement in rates continued in February, mainly in the banks which had not cut them in February. They thus fell from 0.05% to 0.25% depending on the institution and borrower profiles. “Since December, there has been an acceleration in the decline in credit rates but also an enlargement of the target of borrowers who can benefit from it, who are not necessarily those with the highest salaries. In February, this movement continues, which boosts the demand for credit which is sustained at the start of the year ” notes Julie Bachet, Managing Director of Vousfinancer.
On average, the rates are currently 1.05% over 15 years, 1.25% over 20 years and 1.45% over 25 years but we can obtain at best 0.55% 15 years, 0.78% over 20 years and 1% over 25 years, rates close to the historical records of the end of 2019.
Is it easier to borrow in 2021?
Until a few days ago, the relaxation of the recommendations announced by the HCSF on December 17 had had little impact on the credit granting standards of banks… Those who already applied the recommendations less strictly have continued to do so, but the others did not relax their criteria. In January, few new banks agreed to exceed 35% debt, or terms of 25 years. However, Since the publication of the notice specifying the HCSF’s recommendation on January 27, most banks have informed us that they can go up to 35% in debt.
With the successive rate cuts applied by the banks, lending rates are currently below their level of a year ago. Combined with the relaxation of the recommendations of the High Council for Financial Stability, which now allows borrowing with a debt ratio of 35%, these falling rates make borrowers more stable, who can thus borrow nearly 10% more than there is. is one year old!
Thus, thanks to the increase in the debt ratio, a couple with € 5,000 in income can repay € 100 more each month (€ 1,750 monthly payment, against € 1,650 at 33% debt). With rates going from 1.70% over 25 years in February 2020 to 1.40% currently – (+ 0.30% insurance), he can thus borrow € 417,000 insurance included against € 380,000 there is a year, or € 37,000 more!
But the banks still remain vigilant …
If on the debt ratio, most banks have relaxed their criteria, some, few in number, are still reluctant to exceed 33%. In addition, few banks, to date, agree to finance again over 25 + 2 years, and some even are still limited to 20 years for rental investments.
Another sign of caution, some establishments take an indicator into account, the DTI (Debt to Income), in the same way as the debt ratio or the remainder of life, and this while the HCSF no longer mentions this indicator in its new recommendation. DTI represents the ratio between the debt and the net income of the borrower and makes it possible to determine whether borrowers are able to meet over time the new monthly charge represented by their new mortgage.
Calculation of the DTI: total capital owed on current loans from borrowers (real estate loans and consumption) + amount of the loan under investigation. This sum must be less than 7 years of income. If this is the case then the bank will agree to go beyond 33 or even 35% of debt, under conditions of remainder-to-live.
For some banks, there remains a safeguard allowing them to reason about a term of outstanding amounts and determine whether the total amount of loans contracted is not too large in relation to income and whether their repayment can be ensured in the long term. In the example above, the couple with € 5,000 in income can theoretically borrow € 443,000. But this amount reaches 7.4 times their annual income. However, thanks to a remainder to live of 3250 €, the bank should give them an agreement.
Since the beginning of the year, there has been an easing in the granting conditions, the degree of which varies however from one bank to another, even if they remain on the whole very vigilant with the profiles of the borrowers with whom they are more flexible. Thus, some banks agree to lend again more than 100% of the value of the property, therefore without personal contribution, but only to borrowers who have high incomes or to certain young people with high potential. In addition, the passage of the flexibility margin from 15 to 20% of the production of banks is good news which should mainly benefit buyers of their main residence and first-time buyers but very little to investors.
Advice for those who want to borrow now
At the start of the year, the market remains dynamic with sustained demand, boosted by the level of mortgage rates. However, in a particular health and economic context, the banks are studying other indicators that go beyond the recommendations of the HCSF:
They are particularly attentive:
the rest to live : share of income remaining at the disposal of a borrower after subtracting loan repayment charges. This sum must be sufficient (€ 800 for a single person on average, € 1,500 for a couple, and € 250 per child) to pay the current household charges each month.
bank overdrafts : they are prohibitive, in particular if there is a jump-charge, that is to say a monthly loan payment greater than the current rent.
at residual savings after project : in the event of a hard blow to the borrower, it will avoid having to take out a consumer loan in the event of unforeseen expenses, or will make it possible to face the repayment of a few monthly payments in the event of financial difficulties.