The trend is clearly reversed. After hitting lows in June 2021, when households took out loans at an average of 1.05% across all maturities combined, mortgage rates have started to rise. They are in May at 1.38% on average, and more precisely at 1.37% in 20 years and at 1.49% in 25 years, according to the CSA Credit Housing Observatory. The cost of borrowing, however, is still well below the rise in the cost of living. Inflation crossed the 5% mark for the first time since 1985 in May.
Nothing alarming a priori, then. Except that some borrowers find themselves against the wall when it comes to making their project a reality. All brokers have been warning for several months about the drop in the usury rate, this ceiling beyond which banks are simply forbidden to lend. Intended to protect households from over-indebtedness, it went from 2.41% to 2.40% on 1 April for loans starting at 20 years. In one year it even dropped from 2.6% to 2.4%.
A very rigorous calculation method
This limit is all the more restrictive as it corresponds to the “all-inclusive” rate offered by the bank, known as the annual percentage charge rate (APR). It obviously includes the loan rate, but also the insurance rate, administrative and guarantee costs. All in all, it is becoming increasingly common for this rate to exceed the authorized ceiling, despite the household being solvent and complying with the debt rule of 35% set by banking regulators.
The wear rate problem arises from its calculation method. It consists of taking the average of the lending rates obtained by households in the previous quarter, increased by a third. However, the lower the reference rate, the smaller the increase will also be. Currently, the difference between the APR offered by the bank and the usury rate is therefore mechanically much lower. This difficulty is even more compelling when, in the same quarter, bank rates rise while usury rates decrease. Professionals in the sector call the phenomenon the “scissor effect”.
We are working on quick fixes to account for the impact of the rate hike on usury rates
It is this blockade that the government wants to remove. Bercy confirms its position as Capital “open to evolution” of the usury rate formula. “We are working on quick fixes to account for the impact of the rate hike on usury rates,” adds the executive. The Ministry of Economy and Finance also spoke yesterday with the French Banking Federation on the subject, with the aim of finding a balance between “consumer protection” and “access to property”.
A concern shared by the governor of the Banque de France, François Villeroy de Galhau: “I believe that (the questions on the issue of the usury rate, ed.) Deserve careful consideration”, he declared on the sidelines of the presentation of the annual report of the gendarme of banks and of insurers, the Prudential and Resolution Supervisory Authority.
Beyond the banking world, it is also the real estate world that sees in this possible relaxation a means to relaunch construction. “We will work, as part of a” financing “working group with our banking partners, on measures and innovations to be proposed to public authorities and aimed at removing the financial blocks that penalize us today: non-indexation of bank loans, rate evolution of usury, new methods of granting real estate loans ”, recalled on May 20 Pascal Boulanger, president of the Federation of Real Estate Developers (FPI).
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