Capital Video: Real estate loan: how much do you need to earn to borrow 250,000 euros and more?
© Getty / Malte Mueller
The sky is clearing for real estate borrowers. After increasing by around three points between the start of 2022 and the end of 2023, undermining the borrowing capacity of households, mortgage rates have been falling since the start of 2024. They reached on average 3.6 in September. % for loans spread over 20 years according to the broker Vousfinancer, i.e. a drop of 0.7 points compared to September 2023. This reduction in rates is mainly explained by the decision of the European Central Bank (ECB) to lower its key rates, in a context marked by the slowdown in inflation. The aim is to encourage banks to lend money again.
To measure the consequences of this decline in rates on the real estate purchasing power of households, we asked the broker VousFinancer to carry out loan simulations. The idea is to estimate the minimum salary necessary to be able to borrow the sums of 250,000 euros, 400,000 euros and 600,000 euros, with credit spread over 20 years. We carried out these simulations at the current average rate of 3.60%, but also with the rate that was in force in September 2023, namely 4.30%. In this way, it is possible to observe the increase in household borrowing capacity over the past year. In addition, we evaluated the salary that will be necessary to purchase three typical properties in the first quarter of 2025, with the assumption of an average credit rate of 3% over 20 years, which corresponds to the prediction of the brokers that we have interviewed.
As a reminder, a household’s debt rate is limited to 33% of its income according to the rules imposed by the High Financial Stability Council (HCSF). To have the possibility of borrowing 250,000 euros with a loan spread over 20 years in September 2024, a household must earn at least 4,433 euros net per month, since its monthly payments reach 1,463 euros based on the effort rate maximum of 33% authorized by the HCSF. For comparison, the minimum income necessary to be able to take out a loan of 250,000 euros amounted to 4,711 euros in September 2023, when rates were still at 4.30%.
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500 euros earned in one year
In the first quarter of 2025, with the assumption of an average rate of 3%, a household will have to earn “only” 4,201 euros per month to be able to buy a property for 250,000 euros. Or around 500 euros less than a year ago. “The drop in rates allows certain potential buyers, and in particular first-time buyers, to return to the real estate loan market, comments Sandrine Allonier, spokesperson for Vous Financer. The base of potential buyers is therefore increasingly broad, which partly explains the recovery of the real estate market.»
If you are considering buying a property for 400,000 euros, be aware that your household income must be at least 7,092 euros per month in September 2024, for monthly payments which reach 2,340 euros with a loan spread over 20 years at the rate of 3.6%. In the first quarter of 2024, with the assumption of an average rate of 3%, your monthly payments will drop to 2,218 euros. Finally, if you need to borrow the sum of 600,000 euros, you must earn at least 10,638 euros net per month in September 2024 to have a chance of seeing your loan file accepted by your bank.
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