Because of the inflation, the rates of the credits increased gradually these last months, however, the rate of usury remained stable and prevents the banks from carrying out one of their tasks: the loan. Wealth A7 explains you why the usury rate, supposed to protect the French from too expensive credits, is today a brake:

What is the usury rate?

A usury rate is a maximum rate of loan, it means that a bank cannot make a loan above this rate. In principle, the usury rate allows to protect the consumer from a too abusive cost.

The usury rates are calculated every three months by the Banque de France. For this, the average effective rates charged by credit institutions in the previous quarter will be looked at and the usury rate will vary according to these data. Each usury rate is obviously adapted to the duration of the loan but also to the type of loan (= consumer loan, real estate loan).

The APR

The TAEG in French or Annual Percentage Rate allows to count all the expenses attached to the credit, if the percentage obtained exceeds the usury rate, then the banking organization will not be able to grant the requested loan.

The APR includes several elements:

              °   Interest rate of the loan :

              °   Costs, remunerations : file fees and brokerage fees for example.

              ° Premiums of insurance borrower : if the compulsory insurance was subscribed simultaneously.

April rates for real estate credit :

The problem of the usury rate in a period of inflation

For several years, the rates have been historically low and the loans easy to access. However, in recent months, due to the crisis in Ukraine, inflation is on the rise and prices are increasing. Banks are also feeling this increase and refinancing is difficult. As a consequence, the increase that the banks undergo is reflected in the cost of credit and interest rates.

This is where the problem of the usury rate comes into play, for example, if a bank has to increase the interest rate of its real estate loans of a duration of more than 20 years to 1.95% with a borrower's insurance rate of 0.80% for two people, it will be blocked by the usury rate. In fact, the APR will be 2.75% and therefore higher than the usury rate of 2.40%, not to mention the guarantee fees and the file fees!

What is the origin of this problem?

Indeed, the banks find themselves more and more in difficulties to grant loans because their rate will be finally judged excessive. The problem lies in the calculation of this usury rate and its "lag". The cost of living and therefore the rates have not stopped increasing these last months, but the usury rate is calculated only once a trimester based on the data of the previous semester. Thus, this three-month time lag means that the usury rate in a period of inflation is no longer a protection for consumers, but a real brake on their projects. The Minister of the Economy is aware of these difficulties and is ready to change the method of calculating the usury rate in order to make the conditions of access to credit more fluid.

In spite of these difficult times, there are still solutions for your projects, Wealth A7 can accompany you in your search for financing, contact us!