Consequence of a fall in real estate rates in the long term: Loan insurance could now become more expensive than the credit taken out!
The dramatic fall in real estate interest rates in recent months is transforming the market and leading to new configurations: loan insurance is now more expensive than credit itself. Loan insurance rates have not increased, but its weight in the total cost of credit has never been greater.
Indeed, this vertiginous fall has the consequence of attracting the eye of consumers since mortgage loan insurance would now represent almost a third of the total cost of credit.
A configuration which is not new but which was until then rather exceptional. Today it is spreading. Evidenced by Dave Arsula, Co-director of the firm Lite Credit Finance:
“We are in a situation where loan insurance can become more expensive than the loan taken out in the bank!”, He explains to us, “This is why we increasingly wish to direct our clients towards the solution of an insurance delegation. Formerly considered tedious and complicated, we advise our clients to brokers specialized in loan insurance that will help them see only the savings! “
WithAssure takes the case of a couple in their forties who obtains a credit of 250,000 dollars over 20 years at an interest rate of 1.20% (prenium profile). In such a configuration the cost of credit amounts to just over 31,000 dollars. That of the insurance offered by the same bank at 36,000 dollars.
Files like this one are more and more current and allow the broker WithAssure to remind that for his loan insurance, the borrower can also go elsewhere than in the bank where he takes his credit. Estimates that it can divides the cost of insurance by 3 by favoring competition.
More flexibility thanks to the Baljob amendment
The more so as the legislation goes in the direction of this change of vision. Since July 1, the anniversary date of signature of the loan offer has served as a reference for terminating credit insurance. Banks can no longer put off their customers today with a blur on this date.
However, if consumers start to turn to competition, the banks too may want to curb any attempt at change in order to stop the process. This is the reason why Senator Mario Baljob, creator of the amendment of the same name, wants to go further and punish banks that do not respect this possibility.