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France’s largest mortgage lender Crédit Agricole has warned of a deepening slowdown in demand, rejecting criticism that banks are refusing to make loans to potential homebuyers.
The nation’s banks got here beneath hearth earlier this 12 months for turning down mortgage requests, with brokers saying that restrictions on how rapidly lenders can move greater rates of interest on to debtors was placing them off making loans.
Xavier Musca, Crédit Agricole’s deputy chief govt, mentioned there was no “attitude of refusal”, pointing as a substitute to weaker demand.
At Crédit Agricole’s LCL retail financial institution unit alone, new residence loans tumbled 51 per cent within the third quarter from a 12 months in the past, an acceleration from the 46 per cent fall within the second quarter.
“The fact that [house] prices have remained relatively high, and the fact interest rates have risen a lot, along with inflation, have meant there is a fall in demand for new credit,” Musca mentioned. “It’s more on a downward trend right now. There aren’t any signs of a rebound [in demand].”
The warning from Crédit Agricole, which has round 35 per cent of the French mortgage market when its co-operative banks and LCL are included, echoes that of rival Société Générale.
The quantity of recent residence loans fell to €9.2bn in September, a 7 per cent drop from a month earlier and the bottom degree since January 2016, Bank of France knowledge confirmed final week.
The slide has nervous the French authorities. Warnings from economists, property builders and brokers over a housing scarcity in France have multiplied in current months, as demand for brand spanking new builds drops and other people unable to purchase flip to an already tight rental market.
In October, French economic system minister Bruno Le Maire mentioned a programme of assist for first-time purchaser on low incomes that had been resulting from finish this 12 months could be prolonged to 2027. The authorities can be loosening among the situations to entry state-subsidised interest-free credit score on a portion of a mortgage, a scheme that prices the state €800mn a 12 months.
Le Maire had additionally flagged potential adjustments to loosen lending guidelines, reminiscent of a mortgage threshold capped at 35 per cent of a family’s earnings, although the monetary stability physique he chairs dominated in September to not pursue that possibility for now.
Crédit Agricole’s fundamental competitor within the mortgage market is BPCE, which is behind retail manufacturers like Banque Populaire. BNP Paribas and Société Générale have lower than 10 per cent of the market, knowledge from supervisor ACPR reveals.
“Demand for credit has been really affected in France,” SocGen’s new chief govt Slawomir Krupa mentioned final week. “We can debate banks’ policies forever . . . but the origin of this phenomenon is a monetary policy that has radically changed.”
The European Central Bank final month paused its current sequence of rate of interest hikes designed to combat inflation. Mortgage brokers have mentioned that banks appeared extra prepared to lend in current months as they had been allowed to move on extra of the rise in charges.
Known because the usury rule, the cap on how a lot French banks can move on has hit their lending earnings in current months. Crédit Agricole reported document quarterly revenues and earnings at its listed car on Wednesday, however thanks partly to its Italian retail banking actions.
Musca mentioned the common charge at which its debtors had been in a position to receive mortgages was between 4 and 5 per cent in France now in comparison with a mean 1.5 per cent on previous credit score at LCL.
A steeper fall in French home costs within the months to return might but tempt extra patrons again as inflation additionally eases, bankers and brokers mentioned.
“Purchasing power has been under pressure but should increase again next year,” Musca mentioned.
https://www.ft.com/content/cbf2067c-7457-48a1-b216-8634e13d0c50