We have been experiencing a significant financial crisis since 2008. What is its actual impact on the mortgage loan market? The year 2012 saw a contraction of the mortgage market by about 30%, but the causes of this slowdown are not always what one might imagine. Here is a quick overview of this important issue.
Mortgage loan results in 2012
While in 2010, some 275,899 mortgage loans were taken out, and even 325,454 in 2011, last year saw a significant decline in this market: according to data published at the end of January by the Professional Credit Union, 220,124 loans were taken out in 2012, a drop of over 30%.
This decline “is largely attributable to the abolition, since the end of 2011, of a series of incentives for the renovation market, such as the tax deduction for a large number of energy-saving investments, as well as the end of the green credit measure with interest subsidy,” explain credit professionals. “The uncertainties generated by the socio-economic context and the decline in consumer confidence are also not unrelated to this development.”
A breakdown confirms this analysis since the decline (between 2011 and 2012) reached 60% for “renovation loans” and 36% for “construction loans” while loans for purchases only decreased by about 10%.
At the end of 2012, this last category represented an average amount of 138,157 euros. In total, more than 21 billion euros were loaned by the various market players in 2012, bringing the total outstanding mortgage loans to about 180 billion euros at the end of December.
Fixed rate or variable rate?
Fixed rates also confirmed their comeback: variable-rate money rents attracted only two out of ten clients in 2012, and three in 2011. In 2009 and 2010, more than half of the mortgage loans were at variable rates. This return to greater security is mainly due to the reduction in the gap between fixed and variable rates over the past two years, making the former more attractive in terms of balancing risk and gain.
Typical client profile?
The primary player in the mortgage market is the “young” who have a capital of 50,000 euros “in hand” when they approach the bank to negotiate a mortgage loan. About 30% of these young people are under thirty years old and borrow an average of 154,570 euros to buy a home. The average monthly repayment amount was 751 euros in 2012 (714 euros in 2011).
Banks have understood this trend well and have recently developed products targeting seniors and self-employed individuals.
Trend?
Interest rates will remain low in 2013 and will confer the primacy of fixed rates. Moreover, banks are broadening the scope of their clients by trying to reach seniors and the self-employed.
The duration of loans tends to lengthen: 25 years is no longer an exception.
The mortgage loan is also becoming a product used by borrowers in difficulty or self-employed individuals who have no other guarantees to offer to access the credit market. Stay informed!
