is it already an insufficient increase in the face of rising interest rates?

[Mise à jour du mercredi 5 octobre 2022 à 11h11] The respite for borrowers with a real estate acquisition project to finance will have been short-lived, regret among the credit professionals. “As might be expected, in October, in the wake of the 0.48 point increase in churn rates over 20 years and beyond, banks have significantly increased their credit rates, even up to 0.40 points for one of them!“, Deplores Sandrine Allonier, spokesperson for the Vousfinancer network of brokers, in a press release published this Tuesday 4 October. “The average rates granted are still increasing at 1.7% over 15 years, 1.9% over 20 years and 2.10% over 25 years”, indicates the broker, according to the first rate grids sent by banks in October.

Same observation to Empruntis: “The rise in mortgage rates continues. On the scales received at the beginning of the month, we mostly notice increases of 20, or even 30 cents for most of the establishments. Others, much less many, are maintaining their rates. their scales. The rise in rates is therefore the rule, stability the exception. The average rate in 20 years ranges from 1.90% in September to 1.95% today. Buyers with the best records can get a rate of 1.48% before the deal, “reads a press release published Monday, October 3. “So, provided the OAT continues to progress, the window of opportunity available to borrowers as the usury rate increases will be relatively short“, Warns Cécile Roquelaure, spokesperson for the network.

Recall that the wear rate or the maximum legal APR at which credit institutions are authorized to offer loanswas automatically revalued on 1 October 2022. Until 31 December 2022, banks can therefore grant mortgages within the limit of 3.05% for mortgages over 20 yearscompared to 2.57% from 1 July 2022, and 3.03% for children under 20, against 2.60%. These are increments of 0.48 and 0.43 points respectively (more details below).

If its primary objective is to protect families from abusive borrowing rates, the usury rate, in a period of inflation like the one we are experiencing, has the effect of desolventing part of the demand. In fact, in early September, the The European Central Bank (ECB) has decided to raise its three key rates (the interest rate for the main refinancing operations, the marginal lending facility and the deposit facility) by 75 basis points due to inflation. Consequence of this decision: European banking institutions have to pay more to refinance themselves with the ECB. And also raise the interest rates on loans granted to households. A race against time, which has led brokers to ask for a reduction in the gap between the interest rates taken into account for the calculation of the usury rate and the current rates for several months.

What is the wear rate?

The usury rate, also called the “usury threshold” is defined as the maximum annual percentage rate (APR) at which a loan can be granted to an individual by a credit institution. Any loan offered at a higher rate is considered a usurer. The usury rate is governed by article L314-6 of the Consumer Code. It is established by the state in order to protect borrowers from possible abuse by banks and credit institutions.

The usury rate depends on the type of loan, the amount and the duration of the loan. In particular, a distinction is made between consumer loans and real estate loans. For example, real estate loans and loans for works over € 75,000 are divided into five categories:

  • Fixed rate loans with a duration of less than 10 years;
  • Fixed rate loans with a duration between 10 years and less than 20 years;
  • Fixed rate loans with a duration of over 20 years;
  • Variable rate loans;
  • Bridging Loans.

To calculate the usury rate for a given loan category, the Banque de France takes the average effective rate charged by lenders by a quarter and increases this rate by a third. The data obtained constitutes the usury rate for the following quarter.

What is the dropout rate in 2022?

For example, the average effective rate applied in the third quarter of 2022 by lenders for mortgages exceeding € 75,000 over a period between 10 and 20 years was 2.27%. As a result, the usury rate for these same loans in Q4 2022 is 3.03%.

Rates for real estate loans and mortgages for works exceeding € 75,000
Average effective rate applied to
3rd quarter 2022
Usury rate applicable on 1 October 2022
Fixed rate loans with a duration of less than 10 years 2.27% 3.03%
Fixed-rate loans with a duration of between 10 years and less than 20 years 2.27% 3.03%
Fixed rate loans with a duration of 20 years or more 2.29% 3.05%
Variable rate loans 2.19% 2.92%
Bridging Loans 2.55% 3.40%

When is the wear rate updated?

The usury rate is published in the Official Gazette by the Banque de France at the end of each quarter for the following quarter. It is also displayed in the “Rates and Rates” section of the “Statistics” category of the Banque de France website. The usury rate is detailed for all loan categories.

Who sets the usury rate?

The usury rate is set by the Banque de France, which is the central bank of France. Indeed, the Banque de France has monetary, financial and economic missions. Among the services to the economy, we find in particular the protection of families against over-indebtedness. Part of the Banque de France, the Supervisory and Prudential Resolution Authority (ACPR) controls the banking and insurance business.

In the eyes of lenders, some borrowers present a greater risk of default. This is the case of the elderly or some people who exercise a risky profession. The interest rate charged to them therefore exceeds the usury rate and the bank refuses to lend money. To avoid this overshoot and be eligible for a loan, you can play on the TAEA (effective annual insurance rate) by taking out less expensive borrower insurance in another establishment.

Penalties for exceeding the usury rate

Article L341-50 of the Consumer Code provides for penalties for credit institutions that exceed the usury rate. Usury is punished with a 2-year prison sentence and a fine of 300,000 euros. The conviction can be accompanied by other sanctions, such as the prohibition of exercising certain professional activities for a maximum period of 5 years.

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