Increase the duration of the loan and the contribution: The trick to accessing credit in this new school year

In 2021, the financing environment remains favorable and the increase in the maximum debt ratio to 35% benefits all households, in particular the less well-off. borrowing and contribution, an increasingly discriminating factor in accessing the market.

One year after the launch of Datalab, a real estate market observatory, Pretto is analyzing developments in the real estate market in 2021. The financing environment remains favorable and the increase in the maximum debt ratio to 35% benefits all households, in particular especially the less well-off. Nevertheless, the obligation to respect it pushes to increase the contribution and the duration of loan in order to reach the market.

“The real estate market in 2021 is very dynamic. After the first confinement, the borrowers reviewed their purchase plans: it is a question of buying bigger, further, even changing their lives” analyzes Pierre Chapon, president of Pretto.

Indeed, the health crisis has had a strong impact on purchase intentions. With the rise of telework, some French people have turned to medium-sized towns or have decided to move away to become homeowners. This is the case of Parisians, for example, whose searches outside Ile-de-France have doubled post-containment (from 7 to 13%).

Rental investments are also concerned: increasingly disinterested in the capital with high prices – and the consequent contribution – Parisian tenants are turning to the regions, their interest having jumped by 6%. Finally, the market for second homes remained very dynamic, with the French still being interested in this type of property. Demand is thus 42% higher than in 2019.

“These changes observed in the real estate market have contributed to its intense activity this year. This can be seen in the prices which are on the rise; but also by the number of transactions which has exceeded one million over the last 12 months. 2021 could well be a new record year, ”continues Pierre Chapon.

A dynamic market propelled by a marked improvement in borrowing conditions

The good health of the real estate market can also be explained by favorable financing conditions for borrowers. Real estate rates thus reached new historic lows from February 2021 (0.84% ​​over 15 years, 1.01% over 20 years and 1.26% over 25 years according to Pretto data). Their decline continued, reaching 0.83% over 15 years, 0.98% over 20 years and 1.16% over 25 years in early September.

A situation favored by a surplus of bank savings of 157 billion euros since the first quarter of 2020 (Banque de France figures). All households benefit from this reduction in rates, which is 25% between November 2019 and August 2021.

“Without the banks' accommodating policy, many buyers would not have been able to access the property. This factor has greatly contributed to the dynamism of the real estate market this year,” explains Pierre Chapon, president of Pretto.

The relaxation of the HCSF: an advantage for the least well-off households

The decision of the High Council for Financial Stability (HCSF) to determine a maximum debt ratio of 35%, compared to 33% in 2020, also benefited French households. Since January 2021, the share of files between 33 and 35% debt has doubled. The least affluent households experience the strongest increase: 20% of profiles with less than €40,000 have between 33% and 35% debt ratio.

Less well-off households have benefited the most from the increase in the maximum debt ratio from 33% to 35%

“Contrary to what one might think, it is indeed the less financially advantaged profiles who have benefited from this relaxation of the HCSF. This also had a non-negligible impact on their borrowing capacity, up 6%,” says Pierre Chapon.

Indeed, a household with a net monthly income of €3,000 could borrow up to €254,345 in 2020 with a debt ratio of 33%. In 2021, the maximum budget is €269,982.

Services My Sweet'Immo

If, at the start of 2021, the HCSF's recommendations were not yet binding, the approach of the summer and the discussions around a regulatory framework have prompted banks to harmonize their practices (in particular under the supervision of the ACPR). Always eager to lend, they then have more recourse to alternative arrangements, such as the step loan or loan smoothing in order to facilitate access to borrowing for certain borrowers (interns in medicine or holders of several loans).

In this context, the financability measured by Pretto, on the basis of all the simulations carried out on Pretto.fr and deemed feasible, has improved markedly, with a gain of 6 points since 2020 (68 points against 74 in 2021). And, in total, more than 63,000 households were able to return to the real estate market.

“All of these elements combined favor record ^loan production in the first half of 2021, higher than the same period in 2019, a record year. 2021 stands out from previous years,” says Pierre Chapon.

In the 1st half of 2021, loan production (excluding renegotiations) reached 110.7 billion euros, i.e. +27% compared to the same period in 2020. If we compare with the 1st half of 2019 , a record year, at +22%.

Contribution, an increasingly discriminating factor

Although the maximum debt ratio of 35% has favored the return of borrowers, buyers are seeing their loan duration and their contribution increase.

Thus, the average loan term has increased from 21 years in 2020 to 21.8 years in 2021. Similarly, the contribution is constantly increasing (+ €9,000 in 2020, + €11,360 in 2021) to reach nearly €70,000 this year (+42% between 2019 and 2021).

At the same time, the fundability of profiles with a contribution of less than €5,000 remains lower than the general fundability (62 against 75 points), despite a slight improvement since 2020 (57 points against 68 points).

“The contribution is an increasingly discriminating element for borrowers. Banks only finance 110% under conditions, especially for young profiles, with a stable situation and income,” analyzes Pierre Chapon.

The financing of rental investments still struggling

In 2020, only one in two rental investment projects could be financed. Compliance with the debt ratio, but also the end of differential calculus, have impacted this type of project. The trend is continuing this year with financeability not returning to 2019 levels: 51 points in November 2019 compared to 52 points in August 2021. Conversely, the financeability of main residences has gained 2 points.

Strong gaps persist between the different profiles despite the general improvement

Despite the recovery of the economy in many sectors, the distance between profiles that are easier to finance (private employees, liberal professions) and difficult to finance (self-employed, intermittent workers, craftsmen) remains. The fundability gap in 2021 being identical to that of 2020 (26 points), reflecting a similar improvement for both categories (+6 points on the fundability index).

“Short-time working can be a real obstacle to access to credit, especially if savings are low or job prospects are compromised. The banks look at the files on a case-by-case basis for the profiles working in the sectors most weakened by the crisis”, analyzes Pierre Chapon.

In many respects, 2021 appears to be an exceptional year after a year 2020 disrupted by a health crisis and a tightening of grant conditions. For Pierre Chapon, “the year is most certainly conducive to real estate purchases. The only point of attention concerns economic activity, and the gradual end of state aid, which could impact employment for some households, and therefore their access to credit”.