French Mortgage Market Update: Struggling Banks, Lower Margins, and Higher Rates

The French mortgage market is facing a challenging time as banks struggle to maintain their profitability. Despite an increase in the “Taux d’Usure” (usury rate), the refinancing rate has peaked again at the end of February, causing the margin between the refinancing rate and the “Taux d’Usure” to reduce drastically. This has led to banks making negligible profits or even losses, particularly with non-residents who only have a mortgage for their property. This article provides an update on the French mortgage market, including LTV and rates updates, and explores the reasons behind the current situation.

Outline

1. Introduction
2. The struggle of French banks to find their profitability on their mortgages
3. Impact of refinancing rate and Taux d’Usure on bank profits
4. Difficulty of banks to recoup losses with non-resident clients
5. Management fees on cash collateral to improve bank profitability and debt/cash reserve ratio
6. LTV update
7. Deposit required
8. Rates update
9. Taux d’Usure monthly update and its effect on rate increases
10. Updated rates table
11. Possibility of further rate increases
12. Mortgage offers and secured rates
13. Conclusion
14. FAQs

The Struggle of French Banks to Find Their Profitability on Their Mortgages

French banks are facing a tough time as they struggle to maintain their profitability on their mortgages. Despite the “Taux d’Usure” increasing, the refinancing rate – the rate that banks buy money from the European Central Bank (ECB) to lend to their clients – has peaked again at the end of February. This has caused the margin between the refinancing rate and the “Taux d’Usure” to reduce drastically, which, when all fees are added, has led to banks making either a negligible profit or a loss.

Impact of Refinancing Rate and Taux d’Usure on Bank Profits

The refinancing rate plays a crucial role in determining the profitability of French banks. It represents the cost at which banks borrow money from the ECB to lend to their clients. The “Taux d’Usure” sets the maximum interest rate that banks can charge on a loan. The margin between the refinancing rate and the “Taux d’Usure” determines the profit margin of the bank.

In recent times, the margin has reduced drastically, causing banks to make very little profit on their mortgages. This is due to the refinancing rate peaking again at the end of February, despite the increase in the “Taux d’Usure.” The combination of these factors has put pressure on the profitability of banks.

The difficulty of Banks to Recoup Losses with Non-Resident Clients

Non-resident clients who only have a mortgage for their property pose a challenge for French banks to recoup their losses. Unlike resident clients, non-residents do not avail of other products such as car loans, personal loans, or insurance, which would enable the bank to make up for the losses incurred in mortgages.

This is the main reason why one of the major lenders has not resumed its activity yet, and why other banks require a cash collateral on the side. The management fees applied on such collateral help the banks improve their profitability and their debt/cash reserve ratio.

LTV Update

Loan-to-Value (LTV) represents the amount of a mortgage loan compared to the value of the property. French banks generally offer LTVs between 70% to 80% of the purchase price, excluding fees. In some cases, the deposit required is 30%.

Rates Update

Interest rates have crept up again, and we expect them to keep increasing for a while. The Banque de France is now updating the “Taux d’Usure” monthly, which will lead to regular rate increases, but perhaps less radical than before. This will result in some “lissage” of the increase.

Please see the updated rates table below. It’s important to note that further rate increases are likely over the course of the year, and rates can only be secured once a mortgage offer is issued.

It appears that you have provided a table with available rates for repayment and interest-only mortgages. The table outlines the interest rate, term, LTV, and collateral/AUM requirements for each mortgage type.

For repayment mortgages, the available rates range from 3.20% to 4.00% fixed, with a term of 20 years. The LTV ranges from 70% to 90%, while the collateral/AUM requirement ranges from 20% to not applicable (n/a).

For interest-only mortgages, the available rates range from 4.00% to 4.85% fixed, with terms ranging from 10 to 15 years. The LTV is 100% for both mortgages, but the collateral/AUM requirement ranges from 50% to not applicable (n/a). It’s important to note that the rates may vary based on individual circumstances, and clients can secure the rate quoted for up to 90 days once a mortgage offer is issued.

It’s crucial for clients to consider their individual circumstances, including their financial situation and future plans, before deciding on a mortgage. Clients should also seek professional advice from a mortgage advisor to ensure they choose the right mortgage for their needs.

Mortgage Offers and Secured Rates

It’s important to note that the rates above are indicative and may vary based on individual circumstances. Once a mortgage offer is issued, clients can secure the rate quoted for up to 90 days.

Conclusion

In conclusion, French banks are currently facing a challenging time in maintaining their profitability on their mortgages. Despite an increase in the “Taux d’Usure,” the refinancing rate has peaked again, causing the margin between the two to reduce drastically. Non-resident clients who only have a mortgage for their property pose a challenge for banks to recoup their losses.

Moreover, the Banque de France is now updating the “Taux d’Usure” monthly, resulting in regular rate increases. We expect this trend to continue, with further rate increases likely over the course of the year. It’s crucial for clients to secure their rates once a mortgage offer is issued.

FAQs

1. How often does the Banque de France update the “Taux d’Usure”?

The Banque de France now updates the “Taux d’Usure” monthly.

2. What is the maximum interest rate that banks can charge on a loan?

The “Taux d’Usure” sets the maximum interest rate that banks can charge on a loan.

3. How can banks improve their profitability with non-resident clients?

Banks require a cash collateral on the side, and the management fees applied to such collateral help improve their profitability and debt/cash reserve ratio.

4. What is LTV, and what LTVs do French banks generally offer?

LTV represents the amount of a mortgage loan compared to the value of the property. French banks generally offer LTVs between 70% to 80% of the purchase price, excluding fees.

5. Can clients secure the rates quoted in the updated rates table?

Clients can secure the rate quoted in the updated rates table once a mortgage offer is issued, for up to 90 days.