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Access to mortgages: Banque de France dismisses critics

Published December 01, 2020 - 2 mins reading time
Bank watch
For the past year, banks and real estate professionals have been warning of the harmful consequences of the recommendations made by the French High Council for Financial Stability (HCSF) concerning the granting of home loans. The Governor of the Banque de France has described these criticisms as a "bad trial".

Home loans: HCSF calls for caution

At the end of 2019, the Haut Conseil de Stabilité Financière (High Council for Financial Stability) called on banks to exercise caution when granting home loans. The HCSF had issued recommendations aimed at capping loan repayment periods at 25 years, and limiting the effort rate for households taking out a loan to 33%.

Real estate professionals immediately voiced their fears, believing that these restrictions would affect many households and prevent them from buying their own home.

At the time, this concern was shared by Emmanuelle Wargon, the French Minister for Housing: "We need to be able to assess the impact of these rules on new applications, and to have a clear vision of the applications that are no longer being processed", she declared, while acknowledging the importance of "not putting people in situations of over-indebtedness or unable to pay these monthly payments".

The onset of the health crisis has only amplified the criticism levelled by developers, brokers and bankers alike, who believe that many employees who have experienced short-time working could be denied access to a home loan because of this 33% effort rate rule.

Banque de France Governor responds to "bad lawsuits

On the occasion of an ACPR ( Autorité de contrôle prudentiel et de résolution) conference on the impact of the health crisis, held on November 27, 2020, Banque de France Governor François Villeroy de Galhau responded to these criticisms.

"In terms of retail banking momentum, I'd like to point out that home loan production reached an all-time high in September, with 19 billion euros in new loans", he declared, stressing that these figures belied "the bad press about the 'plummeting' of access to real estate financing, which some believe the HCSF's common-sense recommendations on lending criteria would have caused".

By mid-December, the HCSF is due to publish an assessment of the consequences of the recommendations issued at the end of 2019, and will decide, on the basis of the results, whether or not they should be revised.