Status of credit granting to date
Currently, to obtain a real estate loan, you must complete the 2 criteria set by the High Financial Stability Council, the HSCF, by the decision of September 2021:
- Borrowers’ effort rate: it must not be greater than 35%. This means that the borrower’s maximum debt ratio must not exceed this limit.
- Credit maturity: or credit repayment period, it must not be more than 25 years, but can go up to 27 years when purchasing an old property, if large-scale work is necessary and prevents you from enjoying the property immediately after purchase.
In June 2023, another decision from the HCSF slightly relaxed these rules by granting banks a margin of flexibility, but this can only be applied on 20% of their files and only in the context of credit requests for a first-time purchase or for the purchase of a main residence.
At the same time, the surge in monetary inflation, caused by the war in Ukraine, has forced the European Central Bank, the ECB, to be less accommodating and to increase the rate it applies to retail banks, who have, therefore, passed on this increase on the interest rates of individual borrowers and closed the tap on real estate credit.
Solutions currently being considered
Faced with the rules imposed by the HCSF and the constraints imposed by the ECB, the real estate market is at slowed down for several months. But the situation could improve in the coming weeks.
The Ministry of Finance is studying the possibility ofrelax credit conditions with the aim of promoting the relaunch of real estate transactions. Representatives of the French Banking Federation (FBF) were received to take stock of the subject. Bruno Le Maire explains that he is very attentive to the dynamics of production of real estate loans in France. We present below the important points on which the reflection focuses.
Show flexibility
Thus, during this interview, it was a question of using the various flexibilities which were already put in place a few months ago when the HCSF increased to 20% the share of real estate loans on which the banks are authorized to apply their own criteria in a derogatory manner, as explained above.
Review the debt ratio
Sacha Houlié, president of the law committee at the National Assembly, proposes to review certain conditions, such as the maximum debt ratio which is currently 35%, but also the exemptions which are currently open. The minister received a request to this effect, as president of the HCSF.
It is requested that the remainder of life, that is to say what remains after the payment of the monthly loan payment, be taken into account more. Indeed, a debt rate of 35% does not have the same impact on the portfolio of a person who receives a comfortable income as for a person paid the minimum wage.
Review the duration of debt
This duration could be extended to 30 years. In this way, monthly payments would be lower, which would allow certain households to go below the 35% barrier and be able to obtain credit.
Give up strict and overly cautious application
Currently, many households benefit from income that could allow them to borrow and thus buy a primary residence or invest in rental property. Alas, they did not no access to real estate credit due to strict application of the rules decreed by the High Council out of prudence. This situation is problematic in the current context.
Better take into account the current context
It is necessary to take this 2023 context into consideration: rates are historically high, as for transactions, they are historically low. In these conditions, the same granting criteria as in 2019 can no longer be applied. It is therefore necessary to change things to unblock the situation.