WEAR RATE. It corresponds to the maximum rate at which banks and other credit institutions can lend money.
What is the wear rate? Definition
The wear rate (a term also found in the form “wear rate”) means the annual percentage rate (APR) maximum to which banks and other credit institutions can lend money in France. It includes the base interest rate, commissions and insurance premiums of the borrower. There is a usury rate for each of the different loan categories defined by the Banque de France (fixed rate home loans with a duration of less than 10 years, cash loans to families and business loans of less than or equal to 3,000 euros, etc. .). Set by the Banque de France by increasing the average effective rates charged by financial institutions by one third, the various usury rates are published in the Official Gazette at the end of each quarter and act as a legal threshold not to be exceeded. next quarter.
What is the usury rate in 2022 for a mortgage? What does the Banque de France say?
As indicated above, there is not only one current usury rate, but several (one for each loan category defined by the Banque de France). For instance, the usury rate applicable on 1 July 2022 for a “fixed rate mortgage with a duration equal to or greater than 20 years” is 2.57%. You can find all up-to-date wear rates on the Banque de France website.
As an individual, it is possible to get around a lending institution exceeding the usury rate outsourcing the insurance of the borrower (which in particular represents an important part of the cost of a mortgage) included in the credit offer. Facilitated by the Lagarde law and now the Lemoine law, choosing borrower insurance with a specialized insurance company, instead of the collective agreement offered by the bank, can allow you to lower the loan rate to a level below that of the rate. of wear.
A change in the number of monthly payments of the loan can also sometimes lead to a drop in its APR, and thus allow you to bypass the usury rate. Professionals, on the other hand, do not have the right to circumvent the usury rate, under penalty of 2 years’ imprisonment and a fine of 300,000 euros, pursuant to article L341-50 of the Consumer Code.
Loan refusal and usury rate, how does it work?
Therefore, when applying for a mortgage, loan refusals are often encountered due to exceeding the usury rate. Such refusals concern in particular borrowers who present risks in terms of repayment in the eyes of financial institutions (elderly people, people with a serious medical history, etc.). When the lender calculates the total cost of credit for these people, the resulting APR can sometimes be higher than the usury rate and the loan offer cannot legally be sent to the applicant.