The new rules force banks to be stricter in accepting mortgages. This could constitute a barrier to access to loans, especially for investors.
Since 1er January 2022, the criteria to accept home loans will be strict. The recommendations of the High Council for Financial Stability (HCSF) have indeed become mandatory for all French banking establishments. They require that the debt ratio (the percentage of charges – monthly repayment of the loan included – in relation to income) of individuals must remain. below 35%, regardless of their income. In addition, the loan period is limited to 25 years. Exceptions can be granted by banks, but only within a limit of 20% of all credits. Note that the rates are currently, on average, around 1% in 15 years, 1.15% in 20 years and 1.40% in 25 years. The HCSF established these rules to prevent possible slips that were observed in the course of the 2000s.
“This measure alone undermines a certain number of files, especially those of average buyers, notes Patrick Cuvelier, broker of Ingénierie Concept Finance, but the most significant impact will affect rental investments, due to the new method of calculating the debt ratio in the presence of property income. » Indeed, the recommendation of the HCSF with the greatest consequences for investors who want to buy a house to rent is about the new method to take into account the discounted rents in the calculation of the debt ratio.
The most penalized rental investors
There are two ways to factor future rent into an investor’s budget. We can:
- or add the rent to the amount of income (standard method);
- or subtract from the amount of the loads (differential method).
At first glance, the two methods seem identical. In reality, the first is much more unfavorable to investors, because it reduces the relative part of the rent integrating into the mass of income and therefore increases the debt ratio.
Let’s take the case where the rents bring €400 per month, the income is €2,000 and the charges are €950 (€500 monthly for the new loan and €450 for the repayment of an old loan).
With the standard method, the debt ratio is established as follows:
Expenses / Income × 100
= 950/(2000 + 400) × 100
With the differential method, the debt ratio is established as follows:
Expenses / Income × 100
= (950 – 400)/2000 × 100
Note that in reality, banks keep only 70 to 80% of the amount of rent in the estimate of the debt ratio.
It is clear that with the same starting data, the debt ratio is contained under the barrier of 35% with the differential method, but above the standard method. In this second case, the loan that would have been accepted yesterday will no longer be accepted today, with the new recommendations of the HCSF. Consequence: if you have not repaid the loan for your main or secondary residence, the rental investment is now much more complicated.