Home loan: why attrition rates will increase sharply on October 1st

Home loan: why attrition rates will increase sharply on October 1st

Banque de France sets usury rates every quarter. (©lamax / Adobe Stock)

This is the announcement from the Banque de France: usury rates, i.e. the maximum rates that banking institutions are authorized to charge when providing loans, will increase from 1ahem October, as requested by the brokers.

The French institution recalculates it every quarter after collecting mortgage rate data from banks. It therefore decided on September 28, 2022 in a press release that there would be a “reasonable and more significant increase than last June”.

New limits between 3.05 and 3.03%

In detail, “revival will be 0.48% for real estate loans older than 20 years a 0.43% for persons under the age of 20, the new ceilings are increased to or 3.05 and 3.03%We read in the Banque de France press release. The ceilings were set at 2.57% and 2.60% last quarter.

This will make it possible to resolve some of the more difficult credit access situations experienced in recent weeks.

Bank of France

Usury rates on other categories of loans (especially consumer loans and local authorities) will also be increased. The next wear rate adjustment will take place on 1ahem January.

Why is the rate increasing?

The usurious rate, i.e. the maximum legal rate at which a bank can lend, provided by banks to individuals, is protection of the borrower from abuse.

“Usury is primarily a consumer protection mechanism to prevent what could have happened in the United States with the mortgage crisis,” explained Jérôme Cusanno, president of Afib (the French association of bancassurance intermediaries) in a previous article.

However, it has been the subject of strong criticism for several months: brokers condemn the process, which blocks access to credit for many people who want to buy real estate.

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Almost every second mortgage application would be rejected in France due to wear rate. People aged 30-35 and projects to purchase a main residence are most affected.

Professionals have been sounding the alarm since spring. On September 20, a delegation demonstrated in front of the Banque de France in Paris, worried about the too slow growth of the usury rate, which could dominate the real estate market in the long term.

So the good news for borrowers?

This unprecedented increase should therefore enable unblocking.

But be careful, warned Jérome Cusanno: “If rates increase too quickly, the wait time to incorporate that increase into the attrition rate using the quarterly calculation method is too long. Specifically, the loan agreement contains not only the bank’s debit rate, i.e. the nominal rate, the one that is displayed on bank windows, but we also have to add administration fees, guarantees, contributions to the borrower’s insurance. and possibly other costs that condition the provision of this loan. »

So this calculation will give us the APR, or annual effective annual rate, which is the actual rate of the loan under consideration. “It is this TAEG that is then confronted with the attrition rate. Borrowing rates are increasing and there is very little margin to reach the fateful attrition rate limit. »

In fact, files that have very good financial characteristics are sometimes rejected because, for example, the borrower’s insurance costs are too high and their impact on the APR means that the APR exceeds this attrition rate cap.

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