Bercy calls on banks to curb rate hikes

Bruno Le Maire, the French Minister of the Economy and Finance, has made home ownership a real priority, but the rapid rise in interest rates on mortgages has made it difficult. To protect households, whose purchasing power is already being eroded by inflation, the government has asked banks to put the brakes on rate rises.

Efforts to promote purchasing power and home ownership

On Wednesday August 24, the Ministry of the Economy and Finance received representatives from the banking sector, as reported in the daily Le Parisien. As part of this technical meeting, Bercy asked the banks to curb the rise in mortgage interest rates to preserve home ownership.

A few days earlier, Bruno Le Maire had announced his intention to convene a meeting of the banks in the autumn to ask them to make an effort to improve the purchasing power of the French, weakened by inflation.

Bercy intends to get banks to reduce their charges. An effort is also expected from insurers, who are called upon to reduce premiums on certain types of insurance (vehicle and housing in particular).

For their part, banks have been protesting for several months against the usury rate currently set at 2.57% for mortgages of 20 years or more. Banks and brokers consider this rate to be too low compared with market rates.

Industry professionals also point the finger at the method used to calculate the usury rate, which is revised only every 3 months and, in their view, is progressing too slowly in this context of rapidly rising interest rates.

The usury rate at the center of tensions

According to the banks, the usury rate is blocking many mortgage applications. A recent survey by Opinion System, commissioned by the AFIB (Association française des intermédiaires en bancassurance) and others, reveals that conditions for access to mortgages have become stricter: 45% of mortgage applications have been refused since January 1, 2022 because of the usury rate.

While the French Ministry of the Economy and Finance assures us that it is attentive to the banks' demands in this area, it has so far refused to revise the calculation method, so as not to expose households further to the risk of overindebtedness.

Bercy's request to the banks to raise interest rates could help to unblock a number of cases, without having to revise the method of calculating the usury rate.

The government also considers that the banks have sufficient room for maneuver, with an average mortgage rate of 1.35% and a usury rate about to be raised again in October.

For its part, the Banque de France dismisses the arguments put forward by professionals, who believe that the market is being slowed down by the usury rate. Home loan production for individuals has been rising steadily since January, at 6% per month. One in two of these loans is granted to first-time buyers, 20% of whom are low-income households.

The Banque de France has nonetheless listened to the industry's demands, and has made a number of adjustments to its calculation method: since May, the collection of bank interest rates is no longer quarterly, but monthly, to enable the usury rate to be revised in line with market trends.