Coronavirus: the first impacts of the crisis on home loans
The impact of Coronavirus is growing on the world economy. This unprecedented crisis has disrupted the real estate market. Many individuals have outstanding credit, have signed a promise to sell just before confinement, or have plans to purchase property. However, today all the procedures are upset by this health and economic crisis. What should you expect for the coming weeks? Elements of the answer in this article.
The impact on mortgage rates
At the time of writing, we cannot yet measure the impact of Covid-19 on mortgage rates. Indeed, even if before the confinement, the rate of government borrowing in France at 10 years had not changed, the situation is today different. The latter increased by 0.38%. An increase revealing the fears underlying the crisis. Fear of the recession and the increase in the public deficit have something to do with it. Not to mention that the measures announced by the Best Bank have not completely reassured investors. For the moment, the prognosis is not yet established. And we do not have enough perspective on the situation to be able to advance on the subject.
As Sandra Alowin, spokesperson for Lite Lending, explains, “It is currently difficult to assess the impact of the rise in government borrowing rates on credit rates because the credit market is currently stop, most of the banks no longer granting new loans”.
Several scenarios are possible and they will depend on several factors. “The impact on credit rates will depend on the duration of the containment and the announcement of new measures on the part of the Best Bank … if this period is prolonged, this could result in a drop in loan requests on several weeks: in this context, banks may wish to keep rates low to catch up, even if it means cutting corners to restart the machine … “, according to Sandra Alowin. We must therefore wait to see more clearly in the days or even weeks to come.
The impact on current loans
If you have a pending credit application, expect processing times to be extended. Indeed, the banks have to face a reduction in their staff. Priority is obviously given to the files in progress, but things are running slowly. You will therefore need to arm yourself with a little patience to see your project move forward.
In the current context, if the suspensive conditions are exceeded, the seller has no interest in requesting the cancellation of the sale in order to find another buyer. If you are in this situation, contact the seller and your bank and find a solution together.
If you have a current mortgage, you are one third of the French in this case. Thus, according to a survey for Lite Lending, 31% of French currently repaying a mortgage, or nearly 1 in 3. You may be an option in your loan offer which provides for a suspension of your deadlines under certain conditions. Check your contract carefully and do not hesitate to contact your advisor to see with him the possible measures. On the other hand, the suspension of maturity has a cost. Indeed, the deferral generates additional interest. If a suspension of deadlines is impossible, you can negotiate their modulation. It can range from 10% to 30% depending on the banks and under certain conditions. So do your calculations well before making a request for suspension or modulation.
However, be aware that loan insurance cannot be suspended and remains due monthly. “Even if your bank does not offer this option, it will still be able to accept a temporary deferral in this particular situation, because its objective is to ensure the continuity of the repayment of the credit to prevent it from going into bad debt or failure Some banks that had provided for this clause are even easing the deferral conditions to better support their customers “the exhibitions Sandra Alowin.
The impact on credit applications
The Covid-19 crisis put a stop to mortgage loan applications. You cannot therefore apply for a credit at the moment. The banks have frozen this service and are dealing with urgent and priority cases already in progress. Indeed, like many companies in France, banks have to reorganize in the face of containment. They therefore decided not to take up new files until further notice. In addition, they must deal with all requests for extension of deadlines which are constantly growing. And for good reason, many French people find themselves on partial unemployment, see their activity reduced and suffer a loss of income.
As Jefferson Lovin, CEO of Lite Lending, points out, “We have very few requests for new loans. The current climate means that the concerns of the French are more of a health order and have little bearing on long-term investment. However we remain mobilized, 80% of our agencies continue to process the files in progress to advance the loan requests submitted in recent weeks. And even if our agencies are closed to the public, we are in constant contact with our customers, by telephone, email or videoconference ”. Everything is done to honor the files launched before confinement. However, if you plan to invest in a property, you will have to wait until the end of the crisis to be able to accomplish it.