The national assembly will discuss this Wednesday, April 10, possible modifications concerning the operation and rules of the High Financial Stability Council (HCSF), often accused of blocking borrowers wishing to take out a real estate loan. So, do we really need to review everything?
It is an acronym that is starting to be familiar to many candidates for a real estate loan, and which has crystallized numerous criticisms for almost two years and the contraction of the real estate loan market: the HCSF, for High Financial Stability Councilis an organization chaired by the Minister of the Economy, which brings together a handful of economists, the governor of the Banque de France, and the presidents or vice-presidents of the financial (AMF) and banking (ACPR) police.
Over the years, the HCSF has established a set of rules on real estate credit with the aim of limiting household overindebtedness and therefore protecting borrowers. As a reminder, these rules have become binding since January 1, 2022, meaning that it is no longer possible for banks to ignore them, under penalty of sanctions.
The main principles are as follows: banks do not have the right to sign a real estate loan if the total amount of borrowers’ housing-related expenses exceeds 35% of their income. (effort rate, also called debt rate, Editor’s note)nor for a duration exceeding 25 years, unless the work represents 10% of the total amount of the operation. These rules can be circumvented in 20% of casesprovided that this primarily concerns main residences and targets, in almost a third of cases, first-time buyers.
But with the sudden rise in real estate loan rates, going from 1% in January 2022 to 4% two years later, the HCSF rules, in particular those relating to the 35% debt rate, found themselves under fire. reviews, accused of blocking borrowers, some of whom are perfectly solvent.
A possibility for banks to waive the debt ratio?
This is why around twenty deputies from Renaissance, Modem and Horizons, around Lionel Causse, submitted a bill to the National Assembly on January 23, 2024 aimed at supplementing the provisions applicable to the High Council for Financial Stability.
The latter wishes to both modify the composition of this High Council, by having a senator and a deputy sit on it, and to relax the supervision of real estate credit by letting the banks waive it if they prove that it does not put them in danger. The text must be discussed in committee this Wednesday, April 10, before a discussion in plenary committee on April 29.
In France, we have a solid banking network which is able to define itself which files are risky or which are not. We must rely on the expertise of banks to be able to grant more credit. And allow them to take into account the rest of their lives, which is a very important concept, explains Lionel Causse in an interview with Capital. There are currently many loan applications which are blocked due to a debt rate which exceeds 35%, while the remaining living expenses of these households are sometimes very high. We must give more flexibility to banks so that they can grant more credits.
For his part, the Minister of the Economy Bruno La Maire, who chairs this HCSF, supports this proposal for reform of the HCSF, according to an indiscretion of the things. Furthermore, the Minister for Housing, Guillaume Kasbarian, admitted to looking favorably on the proposed law. according to AEF Info.
On the side of the HCSF, the announcement of this proposal is received very unfavorably. In a column published in The things on April 4, three members of the high council believe that the BIS, the CERS, the ECB, the FSB and the IMF would be stunned if these proposals were adopted. The HCSF would become an anomaly among macroprudential authorities and its effectiveness would be threatened. Ironically, none of the three of us, who were appointed respectively by the President of the National Assembly, the Senate and the Minister of the Economy, were contacted during our mandate by parliamentarians to discuss the HCSF and the bill seems to be based on an erroneous interpretation of the role of HCSF standards and the causes of the cyclical decline in credit in France.
A risk of insecurity for part of the population
In line with his previous comments, the governor of the Bank of France Franois Villeroy de Galhau, for his part, continued to defend the organization a few days ago on Europe 1: I sometimes hear people say that we should put back in question the HCSF or these criteria. a is really selling illusions because that is in no way the subject. We had put in place common sense criteria to avoid household over-indebtedness, so that people who take on a real estate project are sure of being able to repay it. We relaxed them a little last year and this is what we call the HCSF criteria.
While many brokers and bankers would welcome a change in the rules, Bertrand Cizeau, director of Hello bank!, is more circumspect about any reduction. The HCSF criteria are effectively challenged even if the rule of a maximum debt of 35% helps protect borrowers from excessive debt. The flexibility of 20% of files which can be agreed beyond this limit of 35% makes it possible to take into account cases where the remaining living conditions are correct.
For the director of Hello bank!, access to real estate credit currently remains hampered by the significant drop in real estate purchasing power of around 30% since the start of 2022. This is due to the sharp increase in rates and prices of real estate which is struggling to adjust. The drop in rates since the start of the year is excellent news for buyers, which has allowed them to regain a little more than 4% of real estate purchasing power (excluding the fall in prices).