HCSF recommendations and covid-19 penalize borrowers
Recall, last December, the High Financial Stability Board (HCSF) made its recommendations for use by banks. Unless there is room for manoeuvre for about 15% of cases, borrowers can no longer exceed an effort of more than 33% of debt, nor a credit greater than 25 years. While the first penalized are unsurprisingly modest households and first-time buyers , other wealthier borrowers, as well as rental investors with loans in progress, are also deprived of financing.
In August 2020, the share of property credit files refused was 10.7% compared to 5.5% in 2019. This year, the minimum personal contribution of 10% of the project amount again becomes a prerequisite, as for the first time, they are less numerous by about 5% on the 1st semester 2020.
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With theCovid-19 outbreak and subsequent containment, banks continued to apply these best practices while being even more selective on borrower profiles. Many of them also apply a risk premium .
Monthly instalments that are gradually increasing
In this context, some banks do not hesitate to offer a financial product that is about fifteen years old and yet very little used: the progressive loan at fixed rate.
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How does it work? With a conventional loan, the borrower is given a depreciation chart at the signing of the contract. This list all the monthly payments to be repaid. They are almost identical throughout the life of the credit, and consist of a fraction of the capital, insurance contributions and interest.
With the progressive loan, the first monthly instalments are lower than the last , which reduces the debt rate in the first few years. In practice, the amount of monthly payments to be repaid increases each year, in the order of 1% for first-time applicants and 1.5% for investors.
While this solution is partially circumventing hardening conditions, it is still more expensive than traditional real estate credit. In addition, it is reserved for borrowers whose professional situation is intended to change favourably, so that the budget and the rest to live are not affected by the gradual increase in the debt rate.