the usury rate is the main cause of loan refusal

What is the wear rate?

The wear rate is an indicator established by the Banque de France. It refers to the maximum rate at which a banking institution is able to lend. Indeed, the Banque de France sets new usury rates every quarter. It takes into account the effective rates applied by the credit institutions, increased by a third. The wear threshold thus established allows for the definition of a ceiling on the annual effective rate (APR). Banks cannot overcome it under penalty of judicial proceedings. The usury rate of a fixed rate loan, 20 years or more, defined by the Banque de France on 1 July 2022 is 2.75%. This is an increase of 0.17 points over the previous quarter.

Hiring a home insurance broker can help you get a home loan because the professional can design insurance products that suit your needs and means. At the moment, bank intermediaries say that the usury rate is a major obstacle for people who want to invest in real estate. Note that the usury rate includes the borrower’s base interest rate, commissions, fees, and insurance premiums. On the one hand, banks cannot afford to lower interest rates, particularly due to inflation and the rising cost of refinancing. On the other hand, the contributions of the borrowers are reaching their limit.

Why is the wear rate becoming an obstacle?

It is clear that this year it is more difficult to borrow. This is confirmed by a study recently conducted by Opinion System and commissioned by the French Association of Bancassurance Intermediaries (AFIB). It shows that since January 2022, banks have turned down 45% of mortgage loan applications due to the usury rate. Opinion System conducted this survey with intermediaries, including brokers. The Banque de France defines this safeguard in order to protect borrowers from abusive rates.

Rising interest rates have a major impact on the usury calculation method. The rates charged in the previous quarter are always taken into consideration. Consequently, the fixed ceiling no longer fully corresponds to the reality of the market. The problem does not only affect borrowers, but also real estate professionals fear that credit denial will harm them. Insurance brokers and other industry specialists suggest changing the method of calculating the wear rate by increasing it by 2/3 instead of 1/3. Taking out the borrower’s insurance from the APR calculation might also be a good idea.

Who are the most affected?

Again with reference to the Opinion System study, mortgage rejections by usury rate mainly affect borrowers between the ages of 20 and 55. For good reason, the cost of insurance also weighs heavily on their file. It is for this reason that we recommend that you use the services of an insurance broker to increase your chances of getting a mortgage. He will be able to accompany you in your project, whatever your age. In any case, the Opinion System statistics show that more than half of the waste related to the wear rate is in this age group.

For their part, real estate brokerage professionals agree that we must act without delay. For the good of the economy in general and in view of the increase in rents, it becomes urgent to find solutions to get as many citizens out of rent as possible. Furthermore, the AFIB president, Jérôme Cusanno, announces that the consequences of these numerous refusals are already being seen on the sales of goods. In this, the new is as concerned as the old. But the benefits don’t stop there! They are also likely to affect the construction and public works sector. By extension, the multiplication of waste could affect the work of notaries as well as that of all real estate operators without exception.

We hope that insurance brokers and other real estate experts will be able to make themselves heard and that the Banque de France will review the method of calculating the usury rate from next quarter. To obtain a mortgage, it is also necessary to take into account the regulations of the High Council for Financial Stability (HCSF) which aim to protect the purchasing power of families and the Lemoine law which will soon come into force. It will allow borrowers to change loan insurance at any time.