The banks remain in strong clientele, even if it means slightly reducing their margins on the loans they grant. In May, about fifteen banks further lowered their credit rates from 0.10% to 0.20%. However, they still remain attentive to their profitability. Thus, new banks, national and regional, have just announced the removal of the possibility of transferring their home loans … Given the current level of rates and a possible rise in the medium or long term, this option which is now only offered by a handful of banks, can be very advantageous for borrowers but become costly for banks, posing a real risk to the future profitability of the loans they grant …
Further rate cuts in May up to 0.20%
In May, most of the rate tables received showed rate cuts of 0.10% on average, but up to 0.20% for some. However, a very small number of banks raised their rates, but by only 0.05%. Credit rates are thus returning to levels close to historic lows! Average rates are currently 1.35% over 15 years, 1.55% over 20 years and 1.75% over 25 years but with negotiated floor rates at 0.80% over 15 years, 1.12% over 20 years and 1.35% over 25 years for the best profiles. “Overall, there is currently just a difference of 0.15% with the lowest rates won in the fall of 2016, which testifies to the willingness of banks to capture new customers and support the relative dynamism of the market, even if the level of requests still remains well below the 1 st half of 2017, and this, despite the revival of requests for loan renegotiations observed since the end of March.
Loan portability: an increasingly rare option…
In this context of particularly attractive rates, two banks, national and regional, recently announced the abolition of the portability of their home loans. This option, which allows you to keep your loan obtained on attractive terms for a future acquisition with the advantage of keeping the rate of your credit, is increasingly rare. Indeed, it is now only available in a small handful of online banks, regional banks or specialized establishments, but for how long? Given the current level of rates and a possible rise in the refinancing conditions of banks in the medium or long term, this option, advantageous for borrowers, can become expensive for banks, with margins which could become negative on this type. credit, posing a real risk to their profitability.
“With a possible rise in the rates of financial markets in the medium or long term, it is hardly tenable for a bank to commit to maintaining a very advantageous credit rate on a future acquisition which will take place in 7 to 10 years … The banks offer rates that they voluntarily keep low to boost market dynamics, but if refinancing rates and government borrowing rates go up, they will inevitably have to pass on these increases – at least partially – to their rates credit in order to maintain their margins… This is why the era of loan portability is an almost over era, ” analyzes Sandrine Allonier.
For borrowers for whom the transferability option is already included in the loan offer they have taken out in recent months or years, this clause may still apply, under certain conditions, which may vary from establishment to another.
Among these conditions, the sale and acquisition of the new property must be made within a period specified by the bank (often less than 6 months but in case of handover, this can be up to 1 year). The purchase must be for the same use as the property sold (sale of the main residence and redemption of the main residence). The value of the new property must be greater than the remaining capital due to be transferred. There should not have been any payment incidents on the loan. Finally, the surety, if applicable, must accept the transfer.
Substantial savings in the event of a rate hike
If you are lucky enough to have obtained this option a few months or years ago, you can make substantial savings in the event of a rate hike, for a new loan. An example ? A couple borrows in 2017, 200,000 USD over 20 years at 1.5% and imagine that in 7 years, the family will grow and want to move to a larger apartment. They need financing of 300,000 USD (let’s assume that in 7 years the rate is 4% over 20 years), their monthly payment would amount to 1905.44 USD with a total cost of credit of 157,306 USD without l loan transfer option.
On the other hand, with this option taken during the loan taken out in 2017, the monthly payment for the new loan would then amount to 1,765.15 USD for a total credit cost of 123,637 USD, representing colossal savings of more than 33,000 USD. on the entire loan and 140 USD saved each month. Without forgetting a saving of 1200 USD also achieved on the absence of IRA. In fact, thanks to the loan transfer option, you have no penalties to pay for the early repayment of the 1st loan taken out 7 years ago. You can also keep loan insurance and collateral on the property.