Bercy gives green light to wear rate calculation overhaul

Bersi has decided, to our knowledge, to adopt a change in the method of calculating the rate of depreciation, taking into account “exceptional circumstance the rapid growth of interest rates in the market in recent weeks and especially in recent days. As a reminder, the usury rate corresponds to the maximum legal rate that lending institutions are entitled to charge when granting you a loan. This modification, which is legally permitted, aims to better account for accelerating interest rate increases while maintaining a fair balance between borrower protection and access to credit. It will come into force when calculating the new depreciation rate from July 1.

Thus, rising interest rates will sweep away the latest reluctance to renegotiate the usury rate, a request made by loan officers as mortgage rates hit their lowest point in June 2021 (1.05% average rate, all terms combined).

Since then, rates have started to rise slowly, accelerating sharply in April and then especially in recent weeks. According to the latest data from the Crédit Logement Observatory, the average rate (excluding insurance) at the end of April was 1.38%, which is about the level of April 2019. This average rate even rose to 1.49% over a period of 25 years. years.

Latency problem

The problem lies not so much in the absolute level of the mortgage rate, which is still well below inflation, but in its rate of growth, which is much higher than expected. However, this rapid rise — the 10-year OAT, which serves as the benchmark for mortgage rates, is now securely anchored above the 2.30% threshold — is undermining the interest rate mechanism. de France to protect consumers from over-crediting at inappropriate rates.

This usury rate is actually calculated every three months based on the average rate observed on loans made in the previous quarter, increased by one third. Unlike the rates used by Crédit Logement, the depreciation rate is expressed in annual terms (annual interest rate), i.e. it also includes additional costs such as borrower insurance (mandatory for mortgages) or administration fees.

However, given the quarterly lag, the latest usury declined slightly on April 1 to settle, for example, at 2.40% for a loan of 20 years or more. That’s just ten basis points more than the ten-year OAT, even if banks continue to refinance at the zero rate at the European Central Bank, which should however fall to 25 basis points in July. But banks also have to bear risk costs, distribution costs and management fees.

zero margin

“Our margin is zero, even negative”, according to a bank source. Some banks are already shutting down production, and players without access to refinancing or central bank deposits, such as some online banks, have slammed the brakes on. In fact, due to competition, as well as the usurious rate ceiling, banks cannot easily pass on the increase in refinancing costs to their loan pricing terms.

In practice, low real estate rates, which rise very quickly, and the depreciation rate, which also remains low, given the time lag inherent in the calculation method, create a scissors effect that starts to exclude certain first-time home buyers. or the most modest, from access to finance. Indeed, their tangent files or exceed the 2.40% ceiling too easily, taking into account all costs, including the commission charged by mortgage brokers.

Hence the need to review the device. However, there can be no question of a “big night” of the usury rate, as some professionals demand, meaning, for example, the exclusion of the borrower’s insurance from the calculation of the annual interest rate. This would mean changing the law too risky for the relative majority. “If parliamentarians could introduce mortgages at 0%, they would gladly do it! »jokes the banker.

Adjustment is more political than technical

Therefore, it was decided to change the method of calculation, a possibility provided by law, in the event “exceptional circumstances”. And the recent surge in interest rates, which no one really foresaw, can rightfully be considered an exceptional circumstance.

If the technical measures have not yet been taken, according to a source close to Bersi, the idea is to give more weight to the indicators seen at the end of the previous quarter, rather than at the beginning of the quarter. Moreover, the rate observed at time t actually reflects the price scale fixed two or three months before the moment when the accepted file is actually released. This, according to the banker, “stick more to real rates.”

While at the technical level this billing reform presents no major technical difficulties, at a more political level the issue remains delicate. Even if the government has never really shown an unbridled love for real estate, it cannot afford a bad trial, depriving some of the French of their property rights to housing (even if banks are usually blamed for turning off the tap). Moreover, during the period of inflation, the right of ownership remains an effective means for households to secure the cost of housing in the coming years (and this does not apply to rent). And, unlike in 2019, the labor market is not bad, which increases the appetite of households for stone.

Conversely, Bercy is also reluctant to claim too much wear and tear, which risks consecrating a period of high inflation in the coming months, in the midst of a purchasing power debate. The modification of the wear rate calculation method can be seen as a simple technical measure: it was the result of a very political arbitrage.