Under a bridging loan, the bank advances a percentage of the estimated price of the property to be sold. After the purchase, the borrower has up to two years to sell his old home and pay back. But sometimes the borrower is unable to sell his old property.
They are not about to forget their “stress”: faced with a seized real estate market to sell their property, Nicolas Dufloux and his wife thought they would lose everything when their bridging loan expired, this superbank overdraft allows them to buy a house before they were sold.
It was last year that this 31-year-old logistics manager and his wife, an employment adviser, with no children, planned to sell their apartment in the Lille metropolis for a house in Marcq-en-Baroeul. To facilitate their project, they took out a bridging loan. In this mechanism, the bank advances a percentage of the estimated price of the property to be sold, often around 70%, to finance the purchase of a new property. After the purchase, the borrower has up to two years to sell his old home and pay back.
In 2023, this financing method accounted for 7.1% of home loan applications, according to the Prudential Control and Resolution Authority (ACPR), which oversees banks and insurance companies. In July, the share even reached 8%, a record for at least 11 years. But now the months pass and the Lille couple become disillusioned. Their apartment, which was put up for sale for more than 200,000 euros, found no buyer and, after a revaluation, the price was adjusted down.
The worry lasts until the holidays, when the couple learn it has finally sold for €185,000 — three months before their bridging loan expires. “The announcement of the sale of our apartment was our Christmas present,” recalls Nicolas Dufloux, who does not forget the “moments of stress” before this sale, with the risk of having to leave their new house and sell to repay the bridging loan. which has expired. From his experience, this small resident can only advise candidates to “observe closely how the market develops”, “have a good valuation of your property” and “make sure it covers the new purchase”.
The market “turned around”
Bridging loan rates have risen in parallel with those of traditional real estate loans and now exceed 5% on average according to the Banque de France in March 2024. Bridging loan archives, the Lille agency of NDFI Crédit, the brokerage department of Square Habitat , the Crédit Agricole network of real estate agents still have about ten open. The profile of these “second buyers” has not changed – they are generally between 35 and 50 years old and “want to change houses, to buy better, bigger”, explains Charlotte Baillet, director of this agency.
On the other hand, another source of stress for sellers, banks are more demanding about bridging loans, especially since the market has “turned” over the past year and a half. Right after Covid, “we were in a market of sellers who were masters of the game”, with requests pouring in “in the whole sector of Touquet, Côte d’Opale, Wimereux, etc. Parisians, Belgians bought without even visiting .”
Today, “we are in a buyer’s market, there are many sellers” and sales are taking longer. When the loan is rejected, the candidates accuse the disappointed banks of being “too cautious”, laments a bank manager from the Lille metropolis, interviewed by AFP on condition of anonymity.
“If we didn’t lend more money, we’d be dead,” he recalls, stressing that bankers also fear “embarrassing our customers.”
According to the criteria of the High Financial Stability Council (HCSF), the borrowers’ rate of interest, i.e. the ratio between the loan costs and their income, must not exceed 35%. For the borrower, “there must be money left over for small pleasures, excursions, holidays. There is no point in being in the dream house if you have to eat pasta every day”, emphasizes this banker.