Real estate credit: the idea of ​​accelerating the increase in usury in 2023

The debate on interest rates is far from over as long as their level does not allow households to have proper access to mortgage loans. According to information from the newspaper Les Échos, credit institutions and the Banque de France have initiated discussions not to change the calculation of wear and tear, but the nature of the data used, in order to speed up the progress of maximum rates. Explanations.

Increase wear rate faster

That problem with wear would it be about to be solved? According to the economic and financial news magazine Les Échos, a group consisting of the French Banking Association and the Banque de France has recently been working to develop solutions for find a way out bystalemate in wear rates. The idea that arises is the following: no longer base the calculation of usury ceilings on loans taken out, but on credit offers to households.

Updated by BdF every three months based on the average APR provided the previous quarter and increased by a third, the attrition rates do not reflect the reality of the market. Over Timeshift to the detriment of access to property credit in times of increase in interestthe data hitherto used for the revision of usury is based on the loans actually made, which has the effect of driving down the legal rates, and at least delay their significant development.

Taking into account the loan offers that are proposed to applicants, it would make it possible raise the average APR and D’thus accelerating the increase in wear rates, which would further open access to housing loans in a period of rapidly rising interest rates. Opposite to, there is no question of changing the calculation method.

Change method for calculating wear

that wear rate corresponds to maximum rate for which loans can be granted in the relevant period. As a reminder, it refers to APR (Global Effective Annual Rate), which the banks must not exceed, knowing that APR is includedall costs associated with the credit :

  • loan interest expressed by borrowing or nominal interest
  • registration fee
  • the cost of the guarantee (mortgage, privilege of the lender of money or surety)
  • pricesborrower’s insurance.

If necessary, the APR is supplemented with brokerage commission, costs for assessing the property, as well as costs for opening and maintaining the account. The debit interest is therefore only that part of the final costs.

That increase in wear rates on 1 October 2022 had been met with relief, a short-lived relief, because interest rates keep rising. They have almost doubled in 10 months. In a few days will further interest rate increase in October go cancel any benefits of wear adjustment. It is now impossible to take on debt below the 2% limit (excluding borrower’s insurance and security costs) and for many profiles the loan interest rate approaches 2.50% or even 3%. With an interest rate of 3.05% for loans with a term of 20 years or more, miracle to compress all the other costs in connection with the financing in the APR.

Other ways to change the calculation method arise by making take out APR borrower insurance. Some parliamentarians want one usury reform in 2023 and offer this solution via a amendment of the Finance Act for 2023 filed last week. Meanwhile wear wears them down, these thousands of loan applicants sidelined for not taking into account an objective reality.

Deviating credit rejection

Note that the deposit remains cheap with interest rates still conducive to acquisitions. Gross rates of 2% or even 3% have never slowed down the production of credit, especially in a period of high inflation, which currently leads to negative real interest rates. The problem comes fromdeviation too low between interest rates at time T and usury, standing still for three months. We are witnessing one the resurgence of rejection45% since last July according to the testimony of the brokers.

That solvency of the candidates is not in question, nor theirs debt ratio, fully in line with the regulatory limit (35% of net income before tax, borrower insurance included). The credit is theirs inaccessible due to wear and aging glass ceiling.

While the purpose is to protect households from possible bank abuse, usury should not block access to credit and property for profiles whose case file meets all the imposed solvency criteria and standards for grant.

The series of usury is far from over.

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