The government wants to explore solutions to revitalise the property market, such as bullet loans and mortgages. But these are reserved for specific projects.
Prime Minister Gabriel Attal himself took out a €670,000 bullet loan in 2017. It's a solution that seems to have won him over, as his government has chosen it to "restore purchasing power to the French", who are faced with relatively high lending rates (around 4%) and property prices that are not falling enough to compensate for the rise in interest rates. The French Minister for Ecological Transition, Christophe Béchu, therefore met with the banks in March to "examine new financial tools". Two avenues are being explored: bullet loans and mortgages.
A bullet loan to reduce your monthly repayments
Rarely used by banks, this type of loan has a particular way of working. The borrower repays only the interest on the loan during the term of the contract, the capital being repaid in a single instalment at the end of the loan or when the property is sold. This significantly reduces the monthly repayments on your loan, increasing your borrowing capacity and giving you access to more expensive property.
However, this solution is not without risk. Repaying the capital at the end of the term can be complicated if you don't have enough savings. What's more, the interest, calculated on the total capital throughout the term of the loan, is higher than for a conventional amortising loan.
Mortgages to unlock credit
The principle behind this loan is that borrowers use one or more properties they already own to secure the loan they are applying for from the bank. The value of the property determines the amount of the new loan.
This option often makes it possible to release a loan. However, if the borrower defaults, the bank can seize and sell the mortgaged property to obtain repayment. In addition, mortgage and release fees can be high.
Loans to be handled with care
While these two options are interesting in terms of resolving the financial problems of certain borrowers, bullet loans and mortgages should be handled with caution. They are not a miracle solution for home ownership for everyone. The bullet loan should be reserved for borrowers who have substantial savings to repay the capital at the end of the term and who can assume the associated financial risk.
Mortgages are suitable for homeowners with property assets who need cash for specific projects.
Another option: subsidised rates?
Another option being considered by the government is the introduction of subsidised home loans. This involves creating more favourable loan terms, with a lower rate than those charged by the market. This could take the form of a zero-rate loan (PTZ) or a subsidised loan.
Translated with DeepL.com (free version)
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