Whether real estate loans, car loans, or even consumer loans, according to the Banque de France, payment incidents have increased by 10% this year. By “incidents”it must be understood, difficulties or even impossibilities to pay his monthly payment.
As everything increases – such as food prices or even fuel – the most modest households find themselves taken by the throat. They cut back on outings if they have any, the small pleasures but with an inflation that sets in for several months, often that’s not enough. They can ask the bank, for example, to lower the amount of what they have to repay each month. The counterpart is a spread over time of their credit and that often means additional bank charges. Without forgetting that, sometimes, the banks refuse. Some are then forced to take out a loan to pay the loan: and this is the vicious circle. Moreover, consumer credit is on the rise again: +9% in the first quarter, this year. Finally, unfortunately, sometimes, when the situation is too degraded, an over-indebtedness procedure is triggered.
Rising interest rates may further complicate the situation. In fact, as the rates were very low in recent years, the banks lent a lot without being too careful about the level of household borrowing and they sometimes granted loans whose monthly payments represented up to 40% of income. Hence the problems, today, for many households that have no margins at all to cash in on the rise in the prices of everyday products. But the rules have changed, the conditions of access to loans have become much tougher, precisely to avoid these dramatic situations. Banks are now more careful when granting loans.
With rising interest rates, real estate prices will fall. This is what the European Central Bank (ECB) predicts. According to her, there will be a correction because property prices have been overvalued in recent years by an average of 15%. Hence his warning: the market could undergo a reversal. But not all countries are in the same boat, Slovakia, Estonia, the Netherlands and even Greece are the most exposed. France is less likely to experience a real estate crash.