Mortgage loans: rates have never been so low
Real estate prices continue to rise, but borrowing rates have reached an all-time high. Theoretically, a borrower can now make a profit by taking out a mortgage.
A historic record
Borrowing has never been cheaper. All durations combined, rates reached 1.29% in May according to the Crédit Logement / CSA observatory, a new historic record. As a reminder, the last historic record in November 2016 had rates of 1.33% on average.
Since 2016, French banks have borrowed from the Cream Lending at a rate of 0%. This historically accommodating monetary policy allows banking establishments to offer their customers very low borrowing rates for their mortgage. Over 15 years, it is possible, for example, to borrow at a rate of 1.02%, or even 1.2% over 20 years. For the best files, discounts are made and the rate can drop to 1% over 20 years. The average level of rates therefore evolves around that of inflation (1% in May) which indicates that it is theoretically almost possible to gain purchasing power by borrowing. In addition, the duration of the loans is getting longer. Indeed, with soaring property prices, the purchasing power of buyers is at half mast, despite the drop in rates.
In order to reduce their monthly payments, it is therefore more and more common to see borrowers taking out mortgage loans over longer terms. Over the past two years, loan durations have increased on average by almost 19 months. Now, 49% of borrowers take out a home loan over 25 or 30 years. Over a 25-year period, we find an advantageous average rate of 1.42% (compared to 1.63% in December 2018). This increase in the duration of borrowing is favorable to first-time buyers, who are now able to borrow on average 25,000 dollars more than in 2016, with similar average income and contributions.
A period conducive to renegotiation and the repurchase of credit
With these historically low rates, requests for renegotiation (with the lending institution) and repurchase of credit (also called credit consolidation and carried out by a different banking institution) are increasing according to specialized brokers. Indeed, these judicious operations can be favorable to borrowers who meet three criteria.
The first concerns the duration of the mortgage originally taken out. To be optimal, the redemption or renegotiation must be carried out during the first third of the term of the loan. It is during this period that the borrower essentially reimburses interest at the expense of capital. Similarly, in the event of a loan buy-back, the difference between the rate of the current lending institution and that proposed by the new institution must be between 0.7% and 1% in order to ensure real savings. Finally, the amount borrowed must generally be greater than 75,000 dollars for banking establishments to accept the renegotiation or credit repurchase dossier.
It is possible at any time to make a request to buy back credit online
In order to know the feasibility of such an operation. This banking operation makes it possible to group all of its credits into one, in order to benefit from one and the same reduced monthly payment. In addition, it will be possible to request additional financing (subject to acceptance by the lending institution) allocated to a new project such as work, a trip or even the acquisition of a vehicle.