Credit is at its lowest level since 2015

Credit has slowed as interest rates rise in 2023. The granting of new real estate loans last year reached its lowest level in eight years, at 129.5 billion euros, the Bank of France indicated this Friday, February 2. We have to go back to 2015, a year when interest rates were low, to get 120 billion euros of low-cost housing loans to individual residents.

The Banque de France, however, observed a slowdown in the average interest rate on these loans, which practically did not rise in December (4.04%, after 3.99% in November), and notes that “Some of our European neighbors have already started to back off.” Despite this stabilization in rates, home loan output continued to decline in December to 8.2 billion euros, the lowest since December 2014.

Reluctance of banks

Rising interest rates and banks’ reluctance to make new loans while wages are rising modestly and real estate prices have fallen modestly have dampened demand.

After prosperous months above 20 billion euros in monthly loan production, such as October 2020, May, June and July 2021 or even April and May 2022, the real estate loan market has started to tide over, driven by a catch-up effect after the period. Capturing and will still benefit from attractive rates before the increase announced by the will of borrowers in 2022.

Households have since become less inclined to borrow due to increases in key rates passed by banks from mid-2022 by the European Central Bank (ECB).

While the average rate remained below 1.1% through March 2022, it has not fallen below 2.5% for a year. The total amount of real estate loans outstanding, however, remains significant at around 1,300 billion euros, double what it was fifteen years ago. According to the Banque de France, French people are in debt for an average of 23 years when they buy their main residence, with first-time buyers – who represent half of debtors – seven months more in debt.