The monthly revision of the usury rate

The january 13, 2023

After an unprecedented year marked by historic variations in borrowing rates, a major change is about to take place. Indeed, the significant inflation of 2022 has highlighted considerable problems related to the usury rate (see article why-obtaining-a-borrowing-is-becoming-more-difficult?).

A look back at the problems encountered

As we mentioned in our June article, the problem encountered by banks last year is still ongoing at the beginning of this year. With inflation still present, refinancing rates continue to rise and banks are finding it difficult to lend to their customers or prospective customers within the usury rate. As a reminder, this usury rate corresponds to the maximum authorised APR per category and duration of the loan. Until now, it has been determined every quarter on the basis of the average effective rates charged by credit institutions during the previous six months.

Consequences of these difficulties

As was feared by the brokerage industry, hence their massive mobilisation over the last few months, the number of loans granted has decreased to the point of impacting the property market. 
Indeed, as more and more buyers are blocked in obtaining their loans, many real estate transactions have not been completed or have taken an unusually long time to complete. 

Monthly review of the usury rate: a breath of fresh air

The demand of the various credit actors consisted in a more regular revaluation of the rate in order to avoid significant discrepancies with the refinancing rates. The monthly adjustment, supported by the Minister of the Economy, Bruno Le Maire, is in the process of being accepted by the Governor of the Banque de France. This new method should be applied from 1 March 2023 for a period of 1 or 2 quarters. This is unprecedented, since no change in the usury rate has been made since its introduction in 1966.

This monthly update is a breath of fresh air for those involved in mortgage lending and real estate. This modification should contribute to improve the granting of loans and thus make the market more fluid.

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Article by : STEPHANE SAES

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