Usury rate reform opens a window to fixed rate loans

The new usury rate, the legal maximum rate that credit institutions must respect, applied from July 1, is now known. The decree that modifies the rate and the notice regarding its application are published in the Official Gazette of June 30. From a single rate set at 1.76% last quarter, regardless of the duration of the loan, the rate is now divided according to the duration, rising to 2.75% for loans of more than 2 years and less of 10 years, 2.83% for loans of 10 or less. of 20 years and 3.03% for loans of 20 years and more (see box).

The Ministry of Economy and Finance has taken into account a deadlock situation described by the banks and accepts part of their reform proposals. “It was not a matter of revising the law, the only real change possible was to introduce differentiated durations,” said Philippe Rogier, Credit Director of the AFL (local Agence France).

Fixed rates unlocked

The evolution of the rates of the OAT (bonds assimilated du Trésor), a reference for credit institutions to define their pricing in terms of loan costs, no longer allow lenders to propose offers at long-term fixed rates, locked in by the interest rate level. would wear However, the vast majority of local authorities use this loan profile to finance their investments.

Banca Postale has distributed 100% of loans at fixed rates in 2021. According to Philippe Rogier, “with this reform, the working space is freed up, the rates are consistent with bank margins except for very long rates (40 years). If the Ministry of Finance heard the banks, its position remains cautious. “It should be noted that we benefited for two or three weeks from the cuts in the OAT rate of 25 cents. If it was a 25-cent hike, we’d be caught again. We have no room to work,” adds the AFL credit manager.

Take out the windows to opt for the fixed…

The Banque de France calculates these rates, based on the average rates distributed during the previous three months, increased by one third. “From week to week, market rates rise or fall very quickly. However, the usury rate is valid for a quarter. The new usury rates do not guarantee that we can offer fixed rates throughout the quarter. adds the Director of Marketing of the Local Public Sector and of the Large Associations of La Banque Postale.

Banks market mixed loan contracts that allow borrowers to switch from variable to fixed. And as soon as possible, the rate changes will be activated.

The real need of communities

From tomorrow, the AFL will be able to fix its proposals made in variable rates in fixed rates. “For the transformation of loans to 40 years, we will propose to reduce the duration to thirty years to be able to switch to fixed” specifies Philippe Rogier. At the Postal Bank, the new rate conditions will be known on Monday. “Today, the variable rates remain affordable. But to the local communities that want to borrow at a fixed rate, we advise the local communities to put on standby with their financial partners to opt to take advantage of the windows opened by the tax rates “, sums up Laurent Gautier-Falret.

Regarding the assumption of new loans at fixed rates in these periods of decline, the recourse to the opportune windows should not prevail over the real loan needs of the local communities.

Questions about structured loans

For the Director of Local Marketing Public Sector and Large Associations of the Postal Bank, “the usury rate is intended to protect the loans, but today, it forces the banks to offer products that present uncertainties about the rates”. For the Banque Postale as for the AFL, the structured offer is not welcome. Some banks offer structured loans with a barrier, the loans go from a fixed rate to a variable rate depending on the evolution of the euribor. If the community subscribes to this offer, it has more risks on the evolution of its loan concludes Laurent Gautier-Falret. That’s why we don’t offer this type of loan.”

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