If there was evidence of the transmission of the financial crisis to the real economy, the decline in demand for credit from households and businesses is one since the beginning of the year.
The ebb is very strong in the real estate lending sector, where demand has collapsed. According to the figures given to the World by several major French banks, household demand in this market fell by more than 40% in January, on average compared to January 2008, and by 30% in February, compared to February 2008. It has never been so low for ten years.
Admittedly, these figures are comparable to years of very strong growth and the level of credit production remains high in France. But this decline shows that in the minds of the French, the economic crisis is there and creates uncertainties about the future. In January, France lost 90,000 jobs, a level never achieved in the past.
“We accept to go into debt if we are sure of being able to repay. If we fear for his job or his future, we stop to consume and invest, said Bertrand Jacquillat, a professor at the Institute of Political Studies of Paris and member of The economists’ circle is a general reaction of economic agents and will last as long as unemployment statistics are bad. ”
In 2008, the number of loans granted to households decreased by 4.1% compared to 2007, with already an already greater decline in mortgage loans (-12.7%), according to the Observatory of household loans. The number of real estate transactions has dropped by 23%! The fall in demand is hardly surprising to bankers who had been accused of lowering the market, in 2008, through a restriction of the supply of credit, which was more or less accurate according to the networks. This time, they explain, the market is the victim of a block between buyers and sellers – classic in times of crisis – which reduces the number of transactions.
“Buyers are waiting for the market to fall and sellers are refusing to sell their well-discounted, we only see forced purchases, ” says Philippe Stoltz, head of real estate credit at BNP Paribas. “In addition, he continues, not everyone is afraid of his job, but in such an uncertain environment, many people believe that it is not time to go into debt for twenty-five years.”
The report is the same at Societe Generale, where Jean-Robert Sautter, commercial director of retail banking in France, explains that “we do not embark on new projects when the feeling of anxiety about the future increases. Even the demand of our clientele of civil servants is in decline, “he notes.
For these specialists, however, not everything is black, far from it. Both are observing a “slight tremor on the new home market”, thanks to the incentive mechanisms put in place to counter the crisis (doubling the amount of the loan at zero rates, Sellier amendment on a rental investment, etc.). Specialized real estate financing networks, such as Crédit Foncier de France (CFF), would benefit from this renewed interest in new properties.
In addition, stresses Mr. Sauter, the interest rate cut initiated five months ago, with borrowing conditions once again attractive, could revive the market. “A drop in rates can resolve many households,” he says. Already, loans are cheaper than in 2008, from about 0.3% to 0.5% (about 4.5% for a fixed rate loan over fifteen years).
In terms of consumer credit, the time is also down for demand. New loans decreased by 14.6% in January, compared to January 2008, according to the Association of Financial Companies (ASF).
This decline is mainly due to the fall in car purchases, financed on credit. These usually represent 40% of the consumer credit market. The downturn is also the result of consumer caution in view of the worsening of the crisis, expected this year. Thus, demand for loans would fall everywhere, in bank branches as well as in department stores. Only a small fraction of French people would use consumer credit to make ends meet and fill their bank overdrafts.
On the business side, the situation is the same as for households. In the face of an economic crisis that is taking hold and growing, business leaders are turning their backs. They differ their investment projects, due to a fall in production, proven or anticipated.
For René Ricol, the credit mediator appointed by Nicolas Sarkozy to avoid a national credit crisis, France has entered a second phase of the crisis. “Until October 2008, when we set up mediation, there was a phase of restriction of the supply of bank loans, banks cut overnight their lines of business loans, says Mr. Ricol Now it is the demand of who is bowing because the economic activity is slowing down and the investments are frozen. ”
Just as the state seeks to stimulate household demand through anti-crisis mechanisms, Ricol wants to boost investment in companies. In sectors that are not directly affected by the economic crisis, the credit mediator is pushing companies to innovate, to clear new markets for “growth”.
“The state has put itself at risk to finance the stimulus and the banks have agreed to play the credit game,” says Ricol ” Businesses to invest now. motionless !”