The decline in interest rates continues gradually despite falling demand and rising real estate prices. But certain conditions for granting credit have eased. We explain to you.
A steady decline in unfavorable conditions
The housing credit / CSA observatory published its monthly dashboard of July 2018. This month credit rates averaged 1.43% against 1.44% in June. The decline in interest rates therefore continues gradually, despite declining borrower demand and rising real estate prices.
Credit conditions a little eased
The observatory figures show that banks have relaxed their conditions and especially in terms of personal contribution: the level of it is down 4.1% between January and July 2018. According to an online broker, the first half 2018 16% of first-time buyers did not have a personal contribution. This is called 110% financing.
Banks also lend longer. In July the average loan duration was 222 months (18.5 years) with 244 months in the nine and 237 in the old. That is more than 17 months compared to 2014 and four months more than in January 2018. Loans over 25 years represent 38.2% and 67.5% for 20 years and over. Despite the decline in state aid (PTZ …) the French investment in real estate.
Never forget the true cost of credit
This rate of 1.43% (gross rate) of course means without insurance and cost of security. To know the true cost of your mortgage, you must add expenses. The borrower must indeed pay a fee, which can of course be negotiated down in your favor.
Then we have to take into account the cost of insurance (such as death insurance disability), the costs of constitution of guarantee, the mortgage, notary fees that increase the bill and therefore the monthly payment. Sometimes the commission of the broker is also added … Moreover the more the credit lasts a long time more it is expensive …
We then speak here of the global effective rate or TEG (the APR is for consumer loans) which can then go up to 3/4%. It’s this rate and not another one that needs to be compared if you have several loan offers. There are many simulators on the internet to calculate the true cost of a credit.