The situation in the United States is the opposite of what happens in France on the credit front. While the French mortgage rates are at their lowest for over 30 years (1.43% on average in Q3 according to the Observatory Credit Longerts / CSA), they reach more than 5% in the US according to Medy Banloz, the main player in the sector across the Atlantic.
The situation is an eloquent example to understand the limits of a high rate and therefore the opportunities of a low rate of mortgage credit. Currently in the United States, the rate for a 30-year loan term is about 4.9%. What does this mean for the market and for acquirers? First, there is a decline in the price of real estate. Few households get a loan, so the demand is lower and sellers are forced to lower their prices. In any case, the recommendation of real estate professionals but owners are reluctant to the idea of lowering the selling price of their property. The natural consequence is therefore a market in stagnation.
On the acquiring side, it is becoming increasingly difficult to have the financial resources to obtain a mortgage. Thus, first-time buyers are deprived of the opportunity to buy real estate. For older borrowers, the question arises of making a loan at an inconvenient time. As a result, banks tend to be willing to lend risky real estate loans because they have to be in captivity with customers in order to achieve their goals.
Compared to a complex and economically dangerous situation in the United States, France is doing well: borrowers enjoy exceptional conditions with a minimum rate of 0.47% over 7 years according to the figures of Credither Guide! Over 20 years, the real estate rate in France is 1.60%. But for this beneficial situation for borrowers and lenders to persist, it is important to understand why the United States is in this situation.
An essential element is the solvency of the borrowers. With exceptionally low rates, it is necessary to be sure that borrowing households will be able to repay in the long run even in a recessionary situation. This is to avoid a sharp increase in borrowing rates as is the case in the United States and maintain a healthy real estate market. You should know that housing is an important indicator of the economic health of a country. Borrowers and lenders are thus the guarantors of a virtuous model in which the borrowing rates are low and the monthly payments honored.