2023-12-04 20:00:34
The Ministry of the Economy is trying to raise the bar in real estate. To counter a market in free fall, Bercy and the Banque de France have marginally adjusted the rules governing real estate credit and called for a careful examination of banks’ refusals in this area. “I proposed three technical adjustments” during the quarterly meeting of the High Financial Stability Council (HCSF) held this Monday, the governor of the Bank of France, François Villeroy de Galhau, explained to AFP.
“These adjustments are reasonable: none affects the fundamentals” of the current rules governing real estate credit, and “none risks putting households in a situation of over-indebtedness,” he continued.
The main principles remain set in stone: banks do not have the right to sign a real estate loan if the total amount of borrowers’ expenses related to housing exceeds 35% of their income (effort rate), nor for a duration greater than 25 years. These terminals can be bypassed in 20% of cases, provided that this primarily concerns main residences and targets, in almost a third of cases, first-time buyers.
Relaxations
Among the three adjustments decided on Monday, banks will be able to waive the maximum limit of the loan duration, to go up to 27 years, if work represents 10% of the total amount of the operation.
The HCSF also decided “to authorize credit institutions to exclude the interest charge associated with bridging loans” in the calculation of the effort rate. However, the amount of the bridging loan must not exceed 80% of the value of the property sold.
Finally, banks will have more flexibility to deploy their quota of exceptions. They may occasionally exceed the limit of 20% over a quarter if they fall below this threshold by counting the following two quarters.
Second chance
The HCSF also declared itself in favor of a place agreement for a second examination of refused real estate loan files, an idea launched by the governor on November 17 and taken up by Bruno Le Maire.
This review system “must be simple, accessible and effective,” the governor of the Banque de France told AFP. It would be “transitory and temporary”, would be done on a case-by-case basis, at the request of the applicant for the loan, and would come into force at the beginning of February, according to a source close to the HCSF.
“The banking profession reaffirms its mobilization for the healthy financing of the French economy, and its daily utility values,” reacted the French Banking Federation (FBF). The professional federation does not, however, take responsibility for the initiative of this re-examination proposal, which the HCSF nevertheless attributes to it.
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