Mortgage rates have increased so much in recent weeks that they sometimes exceed the usury rate, currently set at 2.40%. Some files are therefore blocked. Specialists plead for a suspension of this rate given the economic context.
After having set her sights on an apartment under construction, Camille, 31, is about to take out a mortgage when her broker tells her, at the beginning of May, that the file is blocked. With the borrowing rate offered by his bank, what is called the rate of wear would be exceeded, which is prohibited.
It was the first time I heard about this ratetells AFP this Taiwanese woman who has been living in France for almost 10 years, who hopes that her broker will come to an agreement with her bank.
Credit rates have risen from 36% to 70% since January
Intended to protect individuals from abusive borrowing conditions, the usury rate, set quarterly by the Banque de France, is relatively unknown to the general public. Concretely, no bank can, all costs included, lend a rate higher than this threshold calculated on the basis of the average rates granted during the three previous months, increased by 30%.
However, mortgage rates increased from 36% to 70% on average between January and May, according to the broker La Centrale de Financement. The rate of wear is always calculated from the credits granted in the first quarter of 2022. More and more proposals therefore exceed this legal scale.
This very rapid rise and unusual, comments Mal Bernier, director of communication at Meilleurtaux, is explained by the rise in interest rates on French government loans on which banks rely.
A fixed wear rate of 2.40%
In Camille’s case, the bank offered a rate of 2.20% over 25 years, in line with its budget and with the financial standards which require that repayment monthly loan payments by a household does not exceed 35% of its net income. But once all costs are added, the annual percentage rate (APR), which serves as a benchmark, was 2.65%, well above the rate of wear currently set at 2.40%.
We process an average of five cases per month and out of the five this month, all have had wear rate issues, says Camille’s broker. On files where we had (previously) an automatic agreement of all the parties, today we pass practically two or three hours trying to find a solutionhe explains.
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According to several brokers interviewed by AFP, it is between 10% and 15% of files that will no longer be able to obtain a loan, except to review their project. Main victims: people over 40, for whom it is very difficult not to exceed the wear rate, explains Mal Bernier, because they pay more for borrower insurance, which covers various risks such as death, illness or disability, protecting both borrowers and banks against default.
While the usury rate will not be recalculated until July 1 and the rates should continue to rise between now and then, Sylvain Lefvre, president of La Centrale de Financement, pleads for a wear rate suspensionwhich is no longer correlated with real economic life, or for a redefinition of the method of calculation.
Real estate loan: who would benefit from a change in the method of calculating the wear rate?
The cost of credit explodes
But beyond the issue of the wear rate, the rise in rates affects all buyers, the cost of mortgages having automatically become higher. According to the Central Funding, a loan of 180,000 euros over 20 years at 1.45% will ultimately cost 27,446 euros. It’s almost 10000 euros more than if it had been subscribed at the beginning of the year.
The projects whose financing plan is the most extensive may have to be reworked, warns Socit Generale, which advises to check the financing plan with its adviser before committing.
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