A house and a small garden of their own… the dream of eight out of ten French people was still achievable two years ago, thanks to rock-bottom mortgage rates. But the situation has changed. Under what conditions can we now access a real estate loan? Two journalists from “Envoyé Spécial” put themselves in the shoes of a couple seeking to borrow from a bank.
Why, over the past year, has obtaining a mortgage become so complicated? It was a sudden rise in interest rates that precipitated this housing crisis. In July 2022, to combat inflation, the European Central Bank (ECB) raised its key rates, which caused mortgage rates to skyrocket. In one year, they went from 1.69% to almost 4%, on average. Result: while in June 2022, a loan of 100,000 euros cost 16,000 euros in interest, the latter today reaches 47,000 euros.
Given this increase, what income is now needed to be able to borrow from a bank? “Special Envoy” contacted several of them (LCL, Banque Populaire, Caisse d’Epargne, BNP Paribas, CIC, Crédit Mutuel, Société Générale, Crédit Agricole). Their requests remaining unanswered, two journalists from “Envoyé Spécial” decided to compile their own file.
Laura Orosemane and her cameraman put themselves in the shoes of a couple who earn, with two salaries, 4,000 euros per month, the median income of French households. Their ideal house is new, with an area of 96 square meters and a garden. The one they spotted in Seine-et-Marne would cost them 287,000 euros – again, an average budget.
A very controlled debt rate
An appointment is made in a bank – filmed on a hidden camera. Answer: over twenty years, they can borrow 176,600 euros; over twenty-five years, 195,400 euros… with a borrowing rate of more than 5% (without insurance), which is much higher than those on the market currently. And for “a house above that amount”, things are clear: it is not even “not worth it” to apply for a loan.
Despite a reassuring profile, two permanent contracts and a contribution, they will therefore have to revise their expectations downwards. No bank would be allowed to lend them more anyway. Since January 1, 2022, they have been required to respect a rule: the debt ratio must not exceed 35%. Which means that for their income of 4,000 euros (net before tax), the monthly repayments must not exceed 1,400 euros. An amount reduced to 1,200 euros taking into account insurance, systematically required to take out a real estate loan.
Finally, even if our borrower couple finds a house at this price and manages to put together a credit application file, there is no guarantee that it will be granted to them. Like other establishments, this bank rejects most files. A dream of a new house gone in just a few minutes…
Excerpt from “House, the end of a dream?”, a report to watch in “Special Envoy” on November 2, 2023.
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