Credit : the renegotiation boom
An attractive market for borrowers
In the headlines of many media, credit rates are breaking records. In March 2015, the 20-year rate averaged 2.30% nationally, compared to about 3.30% just two years ago. In this context, first-time buyers are not the only ones to benefit. The professionals are certainly observing a slight increase in loan applications since the beginning of the year. But it is more the existing credit buy-backs that are responsible for the market recovery.
Credit is currently recording an increase of credit redemption requests by more than 70% compared to the previous year. The demand is such that more than half of ‘s loan applications are actually renegotiations.
In fact, more and more households are convinced of the interest of the renegotiation of credit. If some borrowers turn to their bank, brokers are also very much in demand for credit redemptions. The savings are potentially more important and especially the approach is simplified. Indeed, through a broker, the borrower redeems his credit to buy a new one with more competitive conditions. But not only. The professional will also advise him to renegotiate the loan insurance to further optimize the gain. This change of insurance is also made more accessible since the Mahon Law.
These favorable conditions, combined with the interest of the French to compare and negotiate, explain this craze. In addition, housing accounts for more than a quarter of the household budget, it makes sense that the purchase of credit is in the forefront of the concerns of borrowers at present.
Conditions accessible to the greatest number
In 2014, the owners who renegotiated their loan via Credit reduced the cost of their credit by an average of € 21,000.
The most favorable conditions for carrying out such an operation:
- A year ago, it was necessary to have a point of difference between the rate of the initial credit and the rate practiced today over the same period, for the operation to be beneficial. Now, given the current rates, even a gap of 0.30 can be judicious.
For example, a credit taken 4 years ago at 4% over 20 years will be easily tradable at current rates of 2.30%.
- Be in the first half of the loan (ideally the first third). For good reason, the repayment of interest is made on the first years of the loan while at the end, it is the capital that is repaid. Borrowers who have already reached one third of their loan are not the most advantaged to renegotiate. It may even be that the operation is no longer profitable if the majority of the interest is already paid.
- The higher the loan amount and the longer the duration, the bigger the profit will be
- On the other hand, borrowers who plan to resell their property in the short term must take into account the amortization of costs incurred by the transaction (prepayment fees, application fees, guarantee fees, etc.)
Two choices are available to borrowers renegotiating their credit.
- Reduce your monthly payment to gain purchasing power right away.
Nearly 50% of ‘s clients opted for this option. On average, the purchase of their credit saved them a little more than € 100 each month, while maintaining the same credit life. Attractive, this drop in monthly payments makes it possible to observe an immediate profit from the fall in the cost of credit.
Maintaining the same duration at attractive rates can also provide an additional envelope for home improvement work while maintaining the current monthly payment
- Reduce the duration of your loan to take full advantage of lower rates
Lowering rates also means taking out a new loan for a shorter period, while maintaining the same repayment amount each month, or even increasing it slightly. Borrowers who are comfortable with their monthly payments, who are looking for larger earnings, are logically moving towards this transaction. For these clients, Credit has reduced the terms of renegotiated loans in 2014 from 15.3 years to 12.6 years, a shortening of the duration of loans by 32 months on average.
Thus, the purchase of credit is a very attractive operation for borrowers. This trend will continue in 2015, especially as interest rates are expected to continue, at least in the 1st half.