Mortgage credit: these alternative solutions that arise in the face of rising rates

Posted on January 22, 2023, 10:00 AM

“There has been no financial innovation in private housing since the creation of the zero-rate loan in 1955,” recently lamented Xavier Lépine, president of Paris Ile de France Capitale and head of Emmanuel Macron’s program on presidential accommodation. But with high property prices and skyrocketing interest rates, that could change.

New ideas, such as the portability of real estate credit recently defended by the National Federation of Real Estate Agents (FNAIM), are returning to fashion.

Variable or mixed rate loans

If 90% of loans are given at fixed rates in France, banks and brokerages could offer more loans at variable rates in the coming months. Some banking institutions are also in the process of training their consultants in these products.

The variable rate loan allows, at the time of contracting, to obtain a lower rate than the fixed rate. But it evolves from there, upwards or downwards, depending on the reference index (the euro zone interbank rate) to which a fixed bank margin is added.

“In the short term, this allows the process to be passed with a lower monthly fee from the outset, underlines Sandrine Allonier, spokesperson for Vousfinancer. But you have to explain very well.

There are other variants with a limited rate: the borrower’s rate cannot exceed a certain limit. There are also hybrid formulas, which combine a fixed rate for a given period (three, five or seven years), followed by a variable rate, with the possibility of early repayment when the loan changes to a variable rate.

Employer subsidized loan

SOFIAP (Société Financière pour l’Accession à la Propriété), a subsidiary of La Banque Postale and the SNCF, offers an employer-subsidized loan facility. When one of its workers intends to acquire his main residence, the companies that created this system bear part of the interest. This allows employees to have a larger budget for their real estate projects and companies to attract and retain their talent, explains the company in a press release.

Created in 1921, SOFIAP originally allowed railway workers to contract loans more advantageously. It later extended its offer to large companies, with more than 50,000 credits financed. SOFIAP has just launched a public notice for companies that wish to implement this system and hopes to obtain from the government exemption from taxes and social impacts arising from the company’s participation in housing assistance.

The LOA applied to real estate

After the car, why not buy his apartment at LOA? Leasing with a purchase option allows gradual access to ownership for profiles not favored by banks, such as self-employed workers, liberal professions or those without personal contribution. This solution is offered by several start-ups like ACQER, Sezame or Pazapa.

Specifically, the start-up buys the property together with the future owner. This is installed immediately and then pays the investor a monthly occupancy fee, to increase their participation in the property or to accumulate a contribution and be in a position to buy it back after a few years.

The personal contribution provided by a start-up

Although the CAFPI broker recorded an average personal contribution of more than 60,000 euros in 2022, this issue has become central for many buyers. “Between the increase in rates and the implementation of the High Council for Financial Stability criteria, many profiles became unbankable,” explains Keyvan Nilforoushan, co-founder of Virgil.

The Parisian start-up has made it its mission to help young workers gain access to property, financing their personal contribution up to 20% of the property price, up to a limit of 100,000 euros. In exchange, Virgil gets a share of the apartment. When the property is resold, the start-up recovers its share, otherwise the owner can buy it back after ten years. “We’ve had a very strong increase in activity in recent months”, explains its co-founder, who has just raised 15 million euros. However, the number of followers remains confidential at this stage, up to a hundred.

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