All categories of borrowers are affected by the increase in interest rates on the 3rdE quarter 2023 regardless of their income level. Loan production improves due to the monthly update of interest rates, which allows banks to increase the profitability of the new loans they provide. However, recovery will be slow, Crédit Logement/CSA Observatory estimates.
Rate growth almost twice as strong as in 2022
At 3E quarter 2023, the average rate on real estate loans was 3.77%. Average rate growth continued unabated throughout the summer. The increase is even almost twice as strong as in 2022: in the first nine months of 2023, the average rate increased by 1.63 points compared to +0.84 points.
“The monthly increase in the usury rate allows banking institutions to increase the rates of loans granted,” observes the Observatoire Crédit Logement/CSA. Banks can slowly increase the profitability of newly granted loans.
Half of the borrowers exceeded the 4.15% limit
In September 2023, the average lending rate across the market reached 3.98%, compared to 3.80% in August. For loans for 15 years, it is 3.81% (compared to 1.74% in September 2022), 4.04% for over 20 years (compared to 1.88% a year earlier) and 4.18% for 25 years (compared to 1, 98%).
Half of the borrowers will exceed the 4.15% limit even for 15 years. “We need to go back to spring 2011 to observe a comparable velocity configuration,” the observatory suggests.
The duration of the loan stabilizes
The average duration of loans granted in 3E quarter 2023 remains at 249 months, or 20 years and 9 months. “Although high, the current duration is no longer sufficient to dampen the rise in prices and rates, nor the level of personal contribution needed for household borrowing capacities,” confirms Observatoire Crédit Logement/CSA.
In fact, an increase in interest rates neutralizes the advantage of extending the duration for most borrowers who are trying to reduce their effort. The rate hike reduced households’ borrowing capacity by 16.7% in 2023. For example, a household that could borrow €100,000 at the end of 2022 can only borrow €83,300 in September 2023.
The stabilization of the average duration has an impact on the structure of production. In September 2023, 64.1% of loans were granted for periods longer than 20 years to 25 years, compared to 65.7% in September 2023.ahem quarter 2023. In 2019, before the recommendation of the High Financial Stability Board (HCSF), which limited the duration of loans to 25 years, the relative weight of this duration group was 46%.
A recovery that will be slow
During the 3E activity on the credit market held up relatively well during the quarter, better than in previous years. Usually, this period sees a seasonal drop in demand. For example, during the 3E In Q2 2019, manufacturing activity decreased by 16.8% compared to Q2.E quarter boy
This year, the decline was smaller, for production by -11.5% and significantly less significant than last year. “This shows the upheaval in the banking supply. But the recovery will be slow and hesitant if the French central bank does not open up access to credit,” the observatory estimates.