Faced with the risk of seeing borrowers trapped in a pincer movement between the rise in mortgage rates and the decline in the usury rate, many industry players are calling for a change in the method of calculating the latter. A request that the consumer association CLCV does not share, for example.
Since April 1, the usury rate on home loans over 20 years has fallen to 2.40%, its all-time low. At the same time, mortgage rates are rising under the pressure of inflation. A situation that complicates access to credit for an increasing number of borrowers files caught in a scissor effect. Some players in the sector, the image of brokers, are therefore asking for changes.
Wear rate, instructions for use
Let’s start with the usefulness and method of calculating this wear rate. As the Minister of Economy explains on his website, the usury rate corresponds to the maximum legal rate that credit institutions are authorized to operate in the granting of credit. This rate varies according to the type of loan. It is fixed at the end of each quarter for the following quarter by the Banque de France and published in Official newspaper.
The goal in creating this rate was to protect borrowers because the credit taps were closed and banks could therefore lend aberrant rates. It was kind of a top rate for that the banks cannot do anything, recalls Sandrine Allonier, director of studies at the VousFinancer broker. To calculate this, the Banque de France takes an average of the rates on loans granted in the previous three months, all costs included, plus a margin of one third.
A margin of one third which is, logically, much more important when the credit rate is high. But with early 2022 rates of around 1%, the margin is much thinner. The problem is that the method has not changedcomplains Sandrine Allonier. When rates were around 5%, we had a margin of 1.5% versus 0.30 today. According to her, a margin that is very insufficient to take into account the differences in profiles.
Another concern, even more so in this period of rising mortgage rates, is temporality. Since the Banque de France is based on the rates of the last three months, there is a delay which is not problematic if the credit rates go down. On the other hand, when credit rates rise and usury rates go down, a scissors effect occurs that can block more and more files.
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In the end, speed inertia Usury is also reported by Sandrine Allonier: For this calculation we take into account only the credit rates that have been accepted. Therefore, when a file is rejected due to a rate that exceeds 2.40%, it is not considered for the next wear rate. This causes it to fall faster than it rises.
What possible solutions?
Should we therefore review the calculation method? So thinks Bruno Rouleau, president of the Professional Association of Credit Intermediaries (Apic). We have been on the subject for three years because we could see the trend coming. Banks are obliged to raise their rates when the usury rate is in the lead with an inertia which makes getting out difficult, explains the pro.
While he doesn’t necessarily want to question this calculation for the previous quarter, the Apic president is instead in the front row for a fixed margin 1.50%, taking the following example: When we have a 5% rate that we increase by 30% there is 1.50% margin. When you have a 1% rate there is only 0.33%. This means that large increases in rate changes cannot be absorbed. It would therefore be necessary to install some sort of minimum margin.
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Second recommendation according to him, remove the borrower’s insurance from the calculation of the APR, this overall credit rate on which the calculation of the usury rate is based. The initial purpose of the APR is to compare the rate between banks, explains Bruno Rouleau. Today there is the TAEA for insurance, so it does not need to be in the APR. It also wants to remove a number of other costs from the calculation method, such as for example Management fees. A new method of calculation which, according to him, would therefore make it possible to lower the credit rate and to more easily fall within the limits of the usury rate, even in the event of an increase in the nominal rate by the banks.
For a long time, brokers have wanted a change in the usury rate. the CLCV we are very attached to this framework it has live tents seen in Anglo-Saxon countries with rates that have become explosive, observes Franois Carlier, general delegate of the CLCV (consumption, housing and living environment).
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For Franois Carlier, the temporary blocking of some files does not necessarily require a revision of the method of calculating the usury rate: the brokers report a problem of ownership of the house. Indeed, nearly 50,000 files credit may fail, but we don’t think that’s a problem. You have to get out of the software where everyone has to be the owners right away.
One thing is certain: the debate on the method of calculating the wear rate is not new. Unsurprisingly, it’s back on the table right now, says Guillaume Rveillard, associate director of Retail Banking Advice at Ailancy. It is also not surprising that brokers bring it. According to him, the fact that the calculation method is a workhorse for these establishments is easily explained: in a situation of low interest rates, the lower fixed cost is important on the total cost of the loan (for example administration fees). According to the agreements between banks and brokers, the latter’s commissions can enter into the calculation of the APR and therefore risk exceeding the usury rate.
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The current usury rate would therefore be at this time no longer a problem for brokers than for borrowers. Guillaume Rveillard believes, however, that the calculation method could be changed, particularly in its quarterly rhythm: we could question the calculation of the wear rate with this time dimension. The Banque de France could recalculate it more often, because not monthly like some banks’ rate revisions.
Presented for two years to the Minister of the Budget, the proposals put forward by Apic have not received a response, according to Bruno Rouleau. But while the next few months look complicated for families wishing to take out a mortgage, the government said a few days ago that it wants families to continue financing their real estate purchases. To the point of agreeing to loosen the rules?
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