The cut in the usury rate decided by the Banque de France on April 1, coupled with the rise in interest rates, is preventing a number of local authorities from obtaining the credit they need to get major projects off the ground.
Usury rate lowered on April 1
The usury rate, revised quarterly by the Banque de France, corresponds to the maximum annual percentage rate (APR, which takes all charges into account) at which a bank can grant a loan. A loan granted at a rate exceeding this limit is considered usurious, and therefore legally sanctionable.
This rate is calculated by the Banque de France on the basis of the average effective rates, increased by one third, charged by a representative sample of lending institutions. It has been revised downwards slightly for the 2nd quarter of 2022, from 2.41% to 2.40% for fixed-rate mortgages of 20 years or more, effective April 1.
For some weeks now, it has been affecting local authorities, a number of which have been refused loans where the APR exceeds the usury rate. According to the daily Les Echos, the Association des maires de France (AMF) even sent a letter to various ministries in May to highlight the problem.
The consequences are far from negligible: faced with credit refusals, local authorities have no choice but to postpone certain essential projects.
Rising lending rates insufficiently taken into account
The problem lies in the calculation formula used by the Banque de France. This is based on the average rates charged by banks and credit institutions during the previous quarter. However, in the space of 3 months, interest rates have risen, and the usury rate is ultimately lower than what lending institutions are able to offer.
The local authorities most penalized by the situation are those that do not have the best credit rating: banks are not prepared to reduce their margins as they can with lower-risk profiles.
In early June, the French Ministry of the Economy and Finance assured representatives of the banking sector that it was working on various solutions " to enable us to continue to finance the projects presented to the banks in a satisfactory and responsible manner ", as relayed by the French Banking Federation.
Among these solutions, two are mentioned:
- on the one hand, the possibility for the Banque de France to base itself on the rates applied at the end of the previous quarter rather than at the beginning, to take account of their increase during the quarter;
- secondly, the suspension of the application of the usury rate for 6 months, which is authorized by law in exceptional circumstances.