Money Crisis and mortgage: rates rose sharply in May

16:40  03 june  2020
16:40  03 june  2020 Source:   pressfrom.com

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Mortgages rates follow U.S. Treasury yields, which are at historical lows. That makes now a great time to get a mortgage . When Treasury yields rise , investors in mortgage -backed securities demand higher rates . They want compensation for the greater risk.

Le taux moyen des crédits immobiliers a fortement augmenté en France en mai, les banques durcissant leurs conditions face à la crise économique du coronavirus © Pattanaphong Khuankaew / IStock.com The average rate of mortgage loans rose sharply in France in May, banks tightening their conditions in the face of the economic crisis of the coronavirus

The rate mortgage lending rose sharply in France in May, as banks tightened conditions in the face of the coronavirus economic crisis, the benchmark monthly study shows on Wednesday.

Last month, the mortgage rates granted by the competitive sector averaged 1.25%, details in a press release the Crédit Logement / CSA observatory, which associates the main French banks with a research institute Steps.

This is a clear increase compared to May (1.18%) and, more broadly, after months of development at a historic low, affected at the end of last year at 1.12%.

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The subprime mortgage crisis of 2007–10 stemmed from an earlier expansion of mortgage credit, including to When house prices peaked, mortgage refinancing and selling homes became less viable means of settling mortgage debt and mortgage loss rates began rising for lenders and investors.

This leap is a "response to the rise in risks and uncertainty over future macroeconomic and financial developments," said the observatory in a press release.

In other words, the banks are taking fewer risks at the time of a probably historic economic crisis, the government now counting on a recession of 11% this year.

Several credit brokers, as well as notaries, have already worried in recent weeks that the attitude of the banks will harden. They see this as a risk for the activity of the real estate market and the purchasing capacity of the less fortunate households, especially since the prices do not stop their rise.

Admittedly, "the rise in loan rates and the continued rise in housing prices have (...) been partially offset by the lengthening of durations," notes the observatory.

The average duration of home loans stood at 230 months in May, a little over 19 years, and continues to register at historic levels.

All of these figures must be put into perspective by the fact that they come from a very reduced level of activity following the crisis and the containment measures decreed in the face of the coronavirus.

Even though the containment was lifted on May 11, the number of new home loans fell by around 40% over the entire month compared to a year earlier.

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