(Credits: © Andrii Yalanskyi – stock.adobe.com)
Currently, borrowers are caught between rising interest rates and lower usury rates, the maximum rate applicable to a mortgage. Let’s go back to this unprecedented situation.
The increase is slight, but it is present: the home loan interest rates had been going on for some time. At the same time, the usury rate of these loans decreases. As for the maximum legal rate at which banks can lend money to their customers, the problem is relevant. According to some players in the sector, more and more families have not been able to access mortgages due to this phenomenon. Should we be worried about this situation?
What is the wear rate?
The usury rate is the maximum rate at which a bank can lend money to its customers. In the context of real estate financing, this rate takes into account both the nominal interest rate, but also the borrower’s insurance and various costs associated with the credit, in particular administrative costs and brokerage fees. The usury rate is calculated and published quarterly by the Banque de France on the basis of the loans granted by the financial institutions in the last three months. A third margin is added.
The current abandonment rate for real estate loans granted over a period of 20 years or more is 2.40%, an extremely low level. And if the initial goal in setting the usury rate was to protect borrowers, it could now act as a debt brake. Indeed, interest rates for real estate financing have started to rise, and an increasing number of financing proposals risk exceeding this legal threshold, and therefore being rejected by banking institutions.
Why is wear rate a problem?
Many financial operators denounce the usury rate limits. According to Sandrine Allonier, director of studies at VousFinancer, the problem is related to the calculation method which “has not changed”, even though rates have continued to decline in recent years. Indeed, by applying a margin of one third on an interest rate of 5%, this left the banks with a latitude of 1.5%. But with an average rate of 1%, which is close to what we do today, the margin is only 0.33%. Furthermore, the quarterly review of tariffs generates great inertia. Several brokers therefore encourage the Banque de France to calculate the usury rate on a monthly basis, in order to adhere as closely as possible to the reality of the market and not to harm the borrowers. Add to that the current rise in interest rates and you have a perfect cocktail to make it increasingly difficult to access the mortgage.
Not all the players who gravitate around the world of financing, however, speak with the same voice. If brokers are fervent defenders of a revision of the usury rate calculation method, such as Apic, the Order of Credit Intermediaries, consumer protection associations do not see the same thing. François Carlier, General Delegate of the CLCV, says: “For a long time brokers have wanted a change in the usury rate. At the CLCV we are very attached to this picture, which has avoided the slips seen in Anglo-Saxon countries with rhythms that have become explosive.” that “you have to get out of the software that everyone must own immediately.” Because we must not forget that the fixing of the usury rate was done in the first place in the interest of the borrowers, to avoid that the banks could overload their customers and that this situation could cause financial difficulties for the property owners.