Interest rates: 2022 starts off well for mortgages

Interest rates: 2022 starts off well for mortgages

How are the mortgage rates at the beginning of 2022?  (Credits: © Monster Ztudio - stock.adobe.com)

How are the mortgage rates at the beginning of 2022? (Credits: © Monster Ztudio – stock.adobe.com)

The context of the low rates that borrowers suffered in 2021 could continue into 2022. In any case, that’s what the first numbers for this year suggest.

by MoneyVox,

In 2021, interest rates on mortgages were still driving sentiment, with loans sometimes being granted at less than 1%. But in 2022, banks will have to be more selective in filings and apply to speech the decisions of the High Council for Financial Stability (HCSF). With rare exceptions, borrowers will no longer be able to exceed a 25-year period and a debt ratio of 35%. The news that raised fears of a rate hike…but the first data for January 2022 is meant to be reassuring.

An exceptional context for borrowing in 2021…

Now it is customary for all real estate buyers: interest rates on loans have been very low for several years. But 2021 still manages to make an impression with interest rates that have fallen below 1%. A franchise intended for families in the best shape: those with a high level of income, a low debt ratio, a large contribution, a large amount of residual savings (after purchasing real estate), and/or the potential for professional development in the more or less long term.

In addition, 2021 also benefited from a wide distribution of mortgage loans, particularly to first-time buyers. The recommendations of the Supreme Council for Financial Stability in terms of loan term and debt ratio are still only recommendations. But as of January 1, 2022, they have been converted into bonds, raising fears of tighter grant terms this year.

… which should continue in 2022, with some nuances

Only a few files will be able to escape the new HCSF file rules. Others will have to comply, both in the maximum borrowing period of 25 years and for the 35% debt ratio, including insurance, and should not be exceeded. This context may harm the most humble families, those buying their main residence for the first time, or even small investors in rental property. If banks keep some leeway, they will likely use it above all to get the best profiles, which raises concerns that mortgages will be difficult to access.

On the other hand, 2022 should continue the same dynamic as 2021 in terms of interest rates. In fact, the first metrics were published by brokers and banks at the beginning of 2022. Over 15 years, the average rates range from 0.75 to 1% according to data collected by Pretto, Vousfinancer, Le-Partner, Borrowing-Direct and Borrowing . Over 20 years, we can expect conditions between 0.91 and 1.15%, and over 25 years between 1.10 and 1.40%.

Read also: Mortgage credit: Remote work and borrowing, hard to find credit

Banks pick up the best profiles

The numbers above are not about the best profiles: the luckiest families will be able to claim interest rates of less than 1%, regardless of the term of the loan. According to Vousfinancer, it is possible to get 0.55% over 15 years, 0.75% over 20 years, and 0.95% over 25 years. This significantly reduces the total cost of the mortgage and its monthly payments, or borrow more.

If the banks are very aggressive in terms of prices, it is above all because of the unbridled competition that exists between different institutions. To attract new customers, a mortgage is an essential product. Often, the granting of the best terms of borrowing is also conditional on the settlement of family income. Julie Baschett, managing director of Vousfinancer, attests to another important variable: “Most banks have credit production targets equal to 2021, which is a record year. (…) In 2022, they must maintain an offensive rate strategy in the context of strong competition between banks.”

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