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Currently, borrowers are caught between rising interest rates and lower wear rates, the maximum rate applicable to a mortgage. Back to this unprecedented situation.
The rise is slight, but it is present: interest rates on mortgages have been rising for some time. At the same time, the wear rate of these loans decreases. With regard to the maximum legal rate at which banks can lend money to their customers, the problem is considerable. According to some players in the sector, more and more households could not access mortgages because of this phenomenon. Should we be worried about this situation?
What is the wear rate?
The usury rate is the maximum rate at which a bank can lend money to its customers. In the context of real estate financing, this rate takes into account both the nominal interest rate, but also the borrower’s insurance and the various costs associated with credit, in particular administrative costs and brokerage fees. The wear rate is calculated and published quarterly by the Banque de France on the basis of financing granted by financial institutions over the last three months. A one-third margin is added.
The current attrition rate for real estate financing granted over a period of 20 years or more is 2.40%, an extremely low level. And if the initial objective when establishing the usury rate was to protect borrowers, it could now act as a brake on borrowing. Indeed, interest rates for real estate financing have started to rise, and a growing number of financing proposals are likely to exceed this legal threshold, and therefore to be refused by banking establishments.
Read also: Real estate credit: 3 figures which show a tightening of the conditions for granting
Why is wear rate a problem?
Many financial players denounce the limits of the usury rate. According to Sandrine Allonier, director of studies at VousFinancer, the problem is linked to the calculation method which “has not changed”, even though the rates have continued to decrease in recent years. Indeed, by applying a margin of one-third on an interest rate of 5%, this left the banks a latitude of 1.5%. But with a rate of 1% on average, which is close to what is done today, the margin is only 0.33%. In addition, the quarterly revision of rates generates great inertia. Several brokers thus encourage the Banque de France to calculate the usury rate on a monthly basis, in order to stick as closely as possible to the reality of the market and not to harm borrowers. Add to that the current rise in interest rates, and you have a perfect cocktail to make access to mortgage more and more difficult.
However, not all the actors who gravitate around the world of financing speak with the same voice. While brokers are fervent defenders of a review of the method of calculating the usury rate, like Apic, the Professional Association of Credit Intermediaries, consumer defense associations do not see the same thing. François Carlier, General Delegate of the CLCV, states: “For a long time, brokers have wanted a change in the wear rate. At the CLCV, we are very attached to this framework, which has avoided the slippages seen in Anglo-Saxon countries with rates that have become explosive”. He also adds that “you have to get out of the software where everyone has to be the owner right away”. Because we must not forget that the establishment of the usury rate was made in the first place in the interest of the borrowers, to prevent the banks from being able to overcharge their customers and that this situation could cause financial difficulties for the real estate owners.