Denial of a mortgage due to attrition: How many files are really blocked?

Denial of a mortgage due to attrition: How many files are really blocked?

Brokers claim that 45% of files today are rejected due to wear rates that are too low. “This figure is very unlikely (…) I deny it,” François Villeroy de Galhau told BFM Business. Who is wrong, who is right?

Are usury rates blocking the market or not? On the one hand, brokers claim that 45% of files no longer pass. Blame it on rising nominal bank rates, now hovering around 1.85% on average over 20 years. and othersvice that form, increasingly tight, with the rhythm of wear. The latter is the maximum rate, set and updated quarterly by the Banque de France, at which banking establishments are entitled to lend. Now it is 2.57% for terms of 20 years or more and takes into account the ancillary costs and the insurance of the future loan.

A strangulation that François Villeroy de Galhau does not realize. “Real estate credit remains very dynamic, we are at more than 6% growth,” he said at BFM Business. “The rates are gradually going up. In July, we were on average at 1.45% (…) The rates are still very favorable and the mortgage is still very well financed.” And he added regarding rejection rates: “That figure is not very credible (…). I deny the figure of 40 or 45% rejection.

Where is reality then? First of all, it must be understood that the brokers and the governor of the Banque de France do not have the same temporality. When the governor talks about growth of 6% or a rate of 1.45%, he is talking about the credits that have actually been signed. This is how it was negotiated two or three months before. More specifically, as highlighted in the latest press release published in early September by the Banque de France on the subject, outstanding housing loans (i.e. all outstanding loans by households, and who have been contracted over the last few months or several years) rose 6.4% year-on-year in July (and 6.3% year-on-year in August). But the amount of new home loans has fallen sharply, to €20.6bn last August from €23.8bn in August 2021, according to initial estimates. That is a decrease of 13.4% in one year.

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On the other hand, the figure of 1.45% on average for loans corresponds to the TESE (effective rate in the strict sense). However, the attrition rate limit does not refer to this rate but to the TEG (Global Effective Rate), also called APR (Annual Global Effective Rate). And in its press release, the Banque de France itself specifies that “adding 60 basis points (0.60 percentage point, editor’s note) to the average value corresponding to the transition from the TESE to the TEG, the average rate remains very signifcantly lower than the type of wear”. In other words, the TEG in July (according to the Banque de France) is actually already around 2.05%.

The Housing Credit Observatory/CSA, which acts as a reference in the sector, estimates that the average rate on new loans (not including commissions or insurance) was 1.82% in August. But again, these are the rates of the credits actually released, not the current market rates.

Brokers, on the other hand, talk about deals right now T. “Average rates keep rising at 1.5% for 15 years, 1.75% for 20 years, and 1.90% for 25 years, but now more banks are publishing rates above 2% at 20 and 25 years”, points out the broker Vousfinanciar for the month of September. And you still have to add the borrower’s insurance rates as well as the filing fees so as not to exceed the wear rate .

Credit files filtered upstream

Then, the Governor of the Banque de France takes note of the applications actually denied. The files that have been studied by a bank and that after analysis have been denied. But today, many files don’t even make it past this stage. The banks reject them before the analysis, only because in the simulation the APR exceeds the attrition rate. These files rejected even before scanning are not counted. If the governor of the Banque de France doesn’t see them, the brokers do.

Sandrine Allonier, who deals with the communication of Vousfinanciar, specifies for BFM Immo: “The files are filtered at different levels, which explains why at the end of the chain, real estate agency networks such as L’Adresse not only 20 The % of commitments were broken this summer due to a loan refusal. First of all, there is self-censorship and the wait-and-see attitude of potential borrowers who postpone their project for fear of not being able to borrow. Then, the filtering of the broker: in certain agencies, 70% of the drills during the 1st meeting do not pass the attrition… therefore the files are not presented or not in the state Then, the refusal of the banks to take or study files because higher than usury or not at their discretion. And finally, the effective refusal of the banks but then the file can be presented for a second time if they ask for more contribution for example, or with another correction, or reviewable… And all of this a sudden all via will lead to an agreement, but François V Illeroy de Galhau would not have known that it could have been a refusal without the effort of the broker or the banker, an effort that not everyone makes. That is why the notion of rejection rate is different depending on the actors, and the number of filters that have been applied to the file before its arrival at the banker’s desk.

And this refusal to study the files by the banks is a real problem. Not only will the individual not get the loan from him, but he will also not have his official letter of rejection. Very often, however, there is a clause in sales contracts that obliges the buyer to obtain several letters of rejection if he does not have a loan, otherwise he will pay a percentage of the sale price (often around 10%).

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