Credit rates: current trends and outlook

According to the latest Cream Bank statistics published on October 5, home loan rates are strengthening and new production is slowing. However, Best Bank noted in September and October that several large banks lowered their rates, in order to attract borrowers who were actually more cautious about the start of the school year. Analysis and outlook by 2018.

According to the latest Cream Bank statistics published on October 5, home loan rates are strengthening and new production is slowing. Indeed, “the gradual rise in the average interest rate on long-term and fixed rate home loans was confirmed in August 2017 reaching 1.66%, after 1.62% in July and 1.50% in December 2016.

The annual growth rate of loans to individuals remains high in August (+ 6.1%, after + 6.2% in July), still supported at the same time by the dynamism of home loans (+ 6.0%, as in July) and consumer loans ( + 6.0%, after + 6.2%).

Excluding renegotiations, monthly production adjusted for seasonal variations in housing loans fell (10.7 billion dollars, after 13.8 billion in July) ”.

“Since the beginning of the summer, we have seen a slight drop in demand, including in September, a traditionally very dynamic month for real estate …”, confirms the credit broker Best Bank, in a press release published on October 5.

 

New rate cuts in September-October

“Pending government measures, borrowers have been rather wait-and-see but the trend should now reverse… It is in this context and with the aim of maintaining a sustained level of activity that several large banks have declined their rates again in October…” analyzes Jenard Labra, Managing Director of Best Bank.

 

Credit request: down 2.5% over one year

“After a record first quarter and 1 st overall dynamic half, since the summer, credit demand was down slightly (-2.5% yoy), particularly in connection with declining loan renegotiations (only 6% of requests in September against 30% a year ago ), the quieter summer period and the wait-and-see attitude of borrowers who were waiting to have more visibility on the government’s fiscal and housing policy.

Many professionals have perceived this slight drop in activity, especially in view of the exceptional level of activity observed in the first quarter. The rate hikes had boosted demand, which finally weakened this summer, linked to a lack of visibility. The activity should now start again, all the more so the banks remain in strong conquest of customers in spite of production targets already reached. But the counters will soon be reset and the banks on their 2018 targets, “analyzes Alexandra Webber, director of bank relations at Best Bank. From the beginning of November, the requested credits will not be released until the beginning of next January and therefore counted towards the 2018 production ”.

 

Aid for future buyers is shrinking

“PTZ refocused in tense areas in the apartment, removing APL accession, elimination of state premium tax and $ 1525 PEL beginning on 1 January 2018: aid for future buyers are reduced as skin sorrow.” Regarding the ELP, it is a way to build up a contribution because of the regular payments imposed, which is now an asset when you want to become a homeowner, but they will now be taxed from the first year, lowering net earnings savings… And if in the current context of historically low rates, a rate at 2.2% does not seem attractive, it should be remembered that in early 2016, mortgage rates were preciselyaround 2.2% on 15 years! Being able to borrow at this rate level could therefore become very advantageous in the event of a rise in rates … It is therefore better to open a PEL before the end of the year because the new PELs will be more taxed and will no longer be able to benefit from the premium. ‘State of $ 1,525 maximum … ”, explains Alexandra Webber.

 

Level of credit rates essential for the dynamism of the market

Still, don’t worry about next year. In 2018, in this context of more limited purchase incentives, the level of credit rates should be more than ever, an essential factor for the dynamism of the real estate market, ”anticipates Alexandra Webber.

On average, at Best Bank, “we can currently borrow at 1.45% over 15 years, 1.65% over 20 years, and 1.85% over 25 years”. Still attractive rates.

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