What is the usury rate?
The usury rate is an indicator set by the Banque de France. It refers to the maximum rate at which a banking establishment is able to lend. Indeed, the Banque de France sets new usury rates every quarter. It takes into account the effective rates applied by lending organizations, increased by a third. The amortization threshold set in this way makes it possible to define a ceiling at the global effective annual rate (APR). Banks cannot survive legal proceedings. The usury rate for a fixed-rate loan, 20 years or more, defined by the Banque de France on July 1, 2022 is 2.75%. This is an increase of 0.17 points compared to the previous quarter.
Hiring a home insurance broker can help you get a home loan because the professional can design insurance products to suit your needs and your means. At the moment, bank intermediaries say that the usury rate is a major obstacle for people who want to invest in real estate. Note that the usury rate includes the base interest rate, fees, commissions and insurance premiums for borrowers. On the one hand, banks cannot afford to lower interest rates, especially because of inflation and the rising cost of refinancing. On the other hand, the contributions of the borrowers reach their limit.
Why does the rate of use become an obstacle?
It is clear that it is more difficult to borrow this year. A study recently carried out by Opinion System and commissioned by the French Association of Intermédiaires de Bancassurance (AFIB) confirms this. It shows that by January 2022, banks have decreased 45% of mortgage loan applications due to the usury rate. Opinion System conducted this survey with intermediaries, including brokers. The Banque de France defines this safeguard to protect borrowers from abusive rates.
The increase in interest rates has a considerable impact on the method of calculating usury. The fees applied during the previous quarter are always taken into account. Consequently, the fixed ceiling no longer fully corresponds to the reality of the market. The problem does not only affect borrowers, real estate professionals also fear that the refusal of credit will hurt them. Insurance brokers and other specialists in the sector suggest modifying the method of calculating the wear rate by increasing it by 2/3 instead of 1/3. Taking out loan insurance from the APR calculation might also be a good idea.
Who are most affected?
Still with reference to the study of the Opinion System, mortgage rejections due to the rate of wear and tear mainly affect borrowers aged 20 to 55 years. For good reason, the cost of insurance also weighs heavily on their schedule. This is why we recommend using the services of an insurance broker to increase your chances of getting a mortgage. It will be like he accompanies you in your project, whatever your age. However, Opinion System statistics show that more than half of the rejections related to the wear rate relate to this age group.
For their part, real estate professionals agree that we must act without delay. For the good of the economy in general and in view of the increase in rent, it becomes urgent to find solutions to remove as many citizens as possible from renting. In addition, the president of the AFIB, Jérôme Cusanno, announced that the consequences of these numerous rejections have already begun to be seen on the sale of goods. In this, the new is as concerned as the old. But the benefits don’t stop there! It is also likely to affect the construction and public works sector. By extension, the multiplication of waste could affect the work of notaries and also that of all real estate agents without exception.
We hope that insurance brokers and other real estate experts manage to make themselves heard and that the Banque de France reviews the method of calculating the interest rate from next quarter. To obtain a mortgage, you must also take into account the rules of the Higher Financial Stability Board (HCSF) that aim to protect the purchasing power of families and the Lemoine law that will soon come into force. It will allow borrowers to change loan insurance at any time.