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France’s biggest mortgage lender Crédit Agricole has warned of a deepening slowdown in demand, rejecting criticism that banks are refusing to make loans to prospective homebuyers.
The country’s banks came under fire earlier this year for turning down mortgage requests, with brokers saying that restrictions on how quickly lenders can pass higher interest rates on to borrowers was putting them off making loans.
Xavier Musca, Crédit Agricole’s deputy chief executive, said there was no “attitude of refusal”, pointing instead to weaker demand.
At Crédit Agricole’s LCL retail bank unit alone, new home loans tumbled 51 per cent in the third quarter from a year ago, an acceleration from the 46 per cent fall in 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 said. “It’s more on a downward trend right now. There aren’t any signs of a rebound [in demand].”
The caution from Crédit Agricole, which has around 35 per cent of the French mortgage market when its co-operative banks and LCL are included, echoes that of rival Société Générale.
The amount of new home loans fell to €9.2bn in September, a 7 per cent drop from a month earlier and the lowest level since January 2016, Bank of France data showed last week.
The slide has worried the French government. Warnings from economists, property developers and agents over a housing shortage in France have multiplied in recent months, as demand for new builds drops and people unable to buy turn to an already tight rental market.
In October, French economy minister Bruno Le Maire said a programme of help for first-time buyer on low incomes that had been due to end this year would be extended to 2027. The government is also loosening some of the conditions to access state-subsidised interest-free credit on a portion of a mortgage, a scheme that costs the state €800mn a year.
Le Maire had also flagged potential changes to loosen lending rules, such as a mortgage threshold capped at 35 per cent of a household’s income, though the financial stability body he chairs ruled in September not to pursue that option for now.
Crédit Agricole’s main competitor in the mortgage market is BPCE, which is behind retail brands like Banque Populaire. BNP Paribas and Société Générale have less than 10 per cent of the market, data from supervisor ACPR shows.
“Demand for credit has been really affected in France,” SocGen’s new chief executive Slawomir Krupa said last 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 last month paused its recent series of interest rate hikes designed to fight inflation. Mortgage brokers have said that banks appeared more willing to lend in recent months as they were allowed to pass on more of the rise in rates.
Known as the usury rule, the cap on how much French banks can pass on has hit their lending income in recent months. Crédit Agricole reported record quarterly revenues and profits at its listed vehicle on Wednesday, but thanks in part to its Italian retail banking activities.
Musca said the average rate at which its borrowers were able to obtain mortgages was between 4 and 5 per cent in France now compared to an average 1.5 per cent on past credit at LCL.
A steeper fall in French house prices in the months to come could yet tempt more buyers back as inflation also eases, bankers and brokers said.
“Purchasing power has been under pressure but should increase again next year,” Musca said.
