How to understand that despite the fall in interest rates, individuals have more difficulty in buying a home? Charlie Cailloux, legal advisor for the real estate site PAP.fr, explains to us today how this drop in purchasing power is concretely reflected.
If you buy a property today, you will have a larger monthly loan payment than if you bought it a year ago.
How can we explain this, since interest rates are lower today than a year ago?
It is true that rates are historically very low and they are even continuing to fall, but not enough to compensate for the rise in prices. This is the teaching of the loan broker Borrowing study which was published this week.
On the one hand, rates have fallen by 19 hundredths in 6 months; on the other hand, real estate prices climbed 3.6% on average in the territory. And banks will not be able to keep lowering interest rates indefinitely: they keep rates low to encourage demand … and meet their credit production goals.
Is this drop in purchasing power uniform across the country?
No, monthly loan payments are increasing in most major cities, but not at the same rate. As usual, it is in Bordeaux that we see the biggest increase (+ 9.1% since January 2018), the monthly payment increases by 4.6% in Lyon. Elsewhere, it is increasing, but more slowly. It is only the people of Lille who see their purchasing power improve.
What are the consequences for buyers?
To cope with rising prices, the first way is to extend the term of the credit: for the broker Finance yourself, banks agree to grant loans over longer terms (up to 35 years in some cases). The objective is to keep young modest households on the market, which have seen their purchasing power eroded by the abolition of the APL accession and the refocusing of the loan at zero interest.
And the possible increase in notary fees in 2019, which we talked about in this column two weeks ago, would be a new screw on the purchasing power of the French.
You can also buy where it’s cheaper …
Indeed, with the rise in prices, the less well-off households have to move away from city centers to become homeowners. A few months ago, the Chambre des notaires d’Ile-de-France noted discounts of up to 40/50% by simply passing the Paris ring road.
If interest rates are so low, maybe now is the time to renegotiate for those who have already bought?
Yes, this is what the broker advises Meilleurstaux.com to those who took out a mortgage until 2015. Be careful, however, this will only be interesting if there is at least 70,000 euros to be reimbursed and if the difference between the two rates is at least equal to 0.70 point.
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