Access to property: the task becomes more complicated for first-time buyers

Is access to property now mission impossible for first-time buyers? Did they miss the boat by not having taken advantage of the period of low interest rates? Even if, to answer these questions, it should not be categorical, it is clear that the task has become considerably complicated for aspiring owners.

The missed opportunity

Unlike second-time buyers who are already owners and who have the possibility of taking out a bridging loan to finance their new real estate project, first-time buyers start almost from scratch. In most cases, they don’t even have a personal contribution.

Previously, even with a low personal contribution, they could easily obtain a mortgage, since the banks sought to win as many customers as possible and used loans as loss leaders. However, today the situation has changed. The period of low rates is over and credit organizations have tightened their granting conditions.

In a way, we can therefore say that the current contenders for the property may have missed an opportunity to realize their dream more easily. However, it is still possible for them to realize their project, but it may be more difficult than before.

What rate for your project?

Reduced borrowing capacity

ImportantThe High Council for Financial Stability (HCSF) has provided that the rate of effort provided by borrowers to repay their credit must not exceed 35%. However, with inflation which is cutting household income considerably, combined with the rise in interest rates, many people find themselves excluded from the credit market.

To take numerical examples, last year the average rate was 1.08% for loans over 20 years and 1.23% for loans over 25 years. Under these conditions, it was possible for a couple earning 4,200 euros per month to borrow 305,371 euros.

Today, the rates have risen to 2.90% and 3% respectively. To respect the effort rate threshold, the couple is only entitled, over 25 years, to 252,693 euros .

Extra effort required

In addition to a higher interest rate, banks are asking for other guarantees, especially from first-time buyers. In the vast majority of cases, they are asked to a greater personal contribution to be able to obtain the financing .

In the absence of contribution, the future buyer can still obtain a loan, but the sum lent will be greatly reduced, which will lead the project leader to revise his ambitions downwards and to fall back on a smaller surface.

To remember

  • First-time buyers find it more difficult to finance their purchase project because of the rise in interest rates and their dwindling borrowing capacity.
  • Unless there is a substantial down payment, those who are buying for the first time must fall back on properties with a small surface area.