We have been experiencing a significant financial crisis since 2008. What is its actual impact on the mortgage credit 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. A quick overview of this important issue.
Mortgage Credit Results in 2012
While in 2010, some 275,899 mortgage credits were contracted, and even 325,454 in 2011, last year saw this market decline sharply: 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 more than 30%.
This decrease “is largely attributable to the removal, 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 credits” and 36% for “construction” while loans for a purchase decreased by only 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 lent by various market players in 2012, bringing the total outstanding mortgage credits to about 180 billion euros by the end of December.
Fixed Rate or Variable Rate?
The fixed rates also confirm their resurgence: 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 credits were at variable rates. This return to more security is mainly explained by the reduction of the gap between fixed and variable rates over the past two years, making the former, in a balance between risk and gain, more attractive.
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 walk into the bank to negotiate a mortgage credit. About 30% of these young people are under thirty and borrow an average of 154,570 euros to purchase 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 the self-employed.
Trend?
Interest rates will remain low in 2013 and will confer the primacy of fixed rates. Furthermore, banks are broadening the spectrum of their clients, trying to reach seniors and the self-employed.
The duration of loans tends to lengthen: 25 years is no longer an exception.
The mortgage credit is also becoming a product used for borrowers in difficulty or for the self-employed who have no other guarantees to offer to access the credit market. Get informed!