The wear rate drops further (© Pixabay)
The High Council for Financial Stability recommended that French banks not exceed 33% in debt and limit the duration of loans to 25 years. Indirectly, this has lowered the attrition rate, the rate above which an establishment is prohibited from lending money.
(BFM Immo) – Bad news for some borrowers, the wear rate has dropped. The usury rate “corresponds to the maximum legal rate that credit institutions are authorized to charge when they grant credit”, as defined by Bercy. And if the bankers do not respect this ceiling, they risk sentences of two years of imprisonment and a fine of 45,000 euros. It is the Banque de France which sets this rate, based on the average effective rates applied by credit institutions increased by a third, each quarter for the following quarter, and publishes it in the Official Journal. For the second quarter, from April 1, wear rates fall again. Over periods of twenty years or more, the maximum rate has just been lowered by 0.10%, after a decrease of 0.16% on January 1. “In total, it has fallen by 0.86% since January 2017, even though the nominal nominal rates over 20 years have fallen by only 0.15%, which is almost stable.
It is this reduction in the gap between the rates actually charged and the rates of attrition which leads to the exclusion of certain borrowers from the market, “deplores the broker Vousfinancer. For loans of less than 10 years, the wear rate fell from 2.60% in the first quarter of 2020 to 2.41% in the second quarter. For loans between 10 and 20 years, it went from 2.51% to 2.40%.
In principle, this ceiling rate is favorable to the consumer. But with the risk of rising rates, this can be problematic. “There is a gap of 3 months between the average rates used to determine the usury and the conditions proposed by the banks and that is the problem. The mortgage loan wear rate fell further for the second quarter, by 0.10%, while some banks are currently increasing their rates by 0.25% on average. For the moment, the credit market is on pause, but at the time of the recovery, if the rates go up again, there is a risk of scissor effect and of exclusion of the credit of many borrowers who will be refused their loans at reason that the rate exceeds that of wear and tear, ”explains Jérôme Robin, Managing Director of Vousfinancer.
And if these usury rates have fallen while credit rates are starting to rise slightly, it is indirectly because of the recommendations of the High Council for Financial Stability made at the end of December to French banks not to exceed 33% of debt and limit the duration of credits to 25 years. The banks applied them strictly from January. Vousfinancer notes that only the best profiles (with inflows and highs) who benefited from the lowest rates were able to borrow in the 1st quarter, when the more modest borrowers and the investors who traditionally have higher rates (from 0 , 10% on average), were largely excluded from credit.
“We saw it in mid-January, low-income households, who need to borrow for long periods of time to be able to buy enough space to live in, were the most affected by the recommendations. Certain files that we could finance in 2 or 3 banks in 2019 were refused to us ”, explains Sandrine Allonier, spokesperson of Vousfinancer. Thus 64% of the files refused in 2020 at Vousfinancer concern borrowers with less than 25,000 euros of income.
Investors were also affected because, already often owning their main residence with an outstanding loan, their debt in most cases exceeds 33% taking into account their future investment. 27% of the files refused in January-February 2020 are investor files, compared to 22% in 2019, specifies Vousfinancer. “Result the drop in wear rates is the collateral effect of the recommendations of the HCSF which, at first , have excluded certain households from the credit, and in a second time, now results, because of these exclusions, in a reduction in usury rates – consequence of the fact that only the best profiles are financed – which will also mechanically exclude potential borrowers from the moment of market recovery ”, analyzes Sandrine Allonier.
And Jérôme Robin adds: “In addition, we risk being engulfed in a vicious circle: as the usury rate is at a historically low level, certain borrower files will no longer pass, therefore the rate they should have obtained is not taken into account in the calculation of the wear rate which is therefore based only on the accepted files! So the rate of wear does not increase … This is why it takes longer to go up than the scales displayed by the banks, which must therefore also limit the rise in rates, with an impact on the profitability of the loans they grant. “