The Minister of Ecological Transition, Christophe Béchu, wants to develop “new financing mechanisms” to “restore real estate purchasing power”. Leads timidly received by the banking sector.
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While the granting of new real estate loans has reached its lowest level since 2015, the government intends “restore real estate purchasing power to the French”. To unlock access to credit and relaunch this market, the Minister of Ecological Transition, Christophe Béchu, is banking on of “new financing mechanisms”, as “ultimate or mortgage loans”, he declared Monday February 12 in an interview with Parisian.
In reality, these two types of loans already exist. The bullet credit allows the borrower to only pay interest and insurance each month. The borrowed capital is repaid in one go, at the maturity of the loan. But this type of loan is not granted to “Mr. and Mrs. Everyone”, recalls Maël Bernier, spokesperson for the online broker Meilleurtaux, interviewed by RMC. It is generally aimed at rental investors or households with significant financial assets.
“The borrower must prove that he is very financially solid”
This credit involves a risk if the borrower counts on the resale of the property to repay the loan, because the price of the latter may have fallen in the meantime. Banking establishments are therefore very careful about the ability to repay the loan when it comes due. “To ultimately qualify for credit, the borrower must prove that he is very financially solidinsists Maël Bernier. The bank verifies that the latter has invested funds, and can even ensure that he makes monthly payments on a life insurance contract, for example”. The constitution of this savings represents ano guarantee of repayment at the end of the loan.
Moreover, “a credit ultimately is, by construction, more costly in interest than a depreciable loan”, underlines the French Banking Federation to the AFP. As part of a more traditional amortizing property loan, the borrower pays interest each month and repays part of the capital. Since interest is calculated on the outstanding capital, it decreases over time. Conversely, given that the capital is only repaid at the end of a loan in fine, the interest is constant throughout the duration of the loan.
The mortgage loan consists of “to mortgage one or more existing properties to guarantee the new credit”explains to Capital Cécile Roquelaure, director of studies for the broker Empruntis. If the loan is not repaid, the bank can then seize the property and sell it at auction to repay itself. In France, this system is usually “reserved for households that already own”underlines the broker.
Switzerland, an example to be handled with caution
Although Christophe Béchu mentions bullet and mortgage loans, he actually imagines, in his response to Parisiana device which resembles a hybrid form of these two options. “You want to buy a property, you take out a loan over 20 or 25 years, not on 100% of the price, but on 80%, which you typically repay over time”explained the minister on Monday.
“The remaining 20% remains in the form of a mortgage on which you only repay the interest and not the capital. This will only be repaid upon resale.”
Christophe Béchu, Minister of Ecological Transitionin an interview with “Parisien”
This mechanism “allows you to own the property and your land, but defers the repayment of part of the capital, which allows you to obtain lower monthly payments or borrow more for a larger amount.he boasts.
“The idea is to go further than the bullet loan that exists and to be able to work with the banks and the High Financial Stability Council to see if the bullet loan can be used differently,” explains the office of the Ministry of Ecological Transition to Echoes. The minister, for his part, highlights the Swiss example, where this type of credit associated with a mortgage clause “works very well”he assures.
There For its part, the French Banking Federation believes that the Swiss economic, fiscal and legal context is different, and that it is appropriate to remain cautious with this comparison. “In France, bullet loans can sometimes be appropriate in certain property or rental investment transactions, and very rarely in property ownership”, she adds. In a publication on social networks, the governor of the Banque de France calls for his part “to exercise some caution on ultimately repayable loans”. François Villeroy de Galhau table instead “on the stabilization, or even reduction, of prices” real estate to revive the real estate market, even if this remains timid for the moment. Professionals from the banking sector have an appointment with Christophe Béchu, between now and the end of February, to explore these avenues further.