The rules for granting real estate loans maintained to the despair of brokers

Currently, to combat over-indebtedness, banks are not allowed to lend money if monthly payments exceed 35% of income, nor for a period of more than 25 years.

They can deviate from these criteria in 20% of cases, provided that this primarily concerns main residences and targets, in almost a third of cases, first-time buyers.

However, the High Financial Stability Council (HCSF), which associates among others the Ministry of the Economy and the Bank of France, notes that "all establishments do not fully use the flexibilities that it has provided and relaxed during its June meeting", according to the press release published at the end of the meeting held this Tuesday.

It notes that banking establishments only deviate from the rules in 13,8% of cases, and that exemptions excluding the purchase of a main residence, which can only represent 6% of the total credits granted, compared to 4% before June, amount to only 2,4% of the total.

“Banks therefore have room to further increase their credit offering, while respecting [the criteria currently in force],” adds the HCSF, which meets every quarter.

According to a source close to the body, the prevailing feeling today is that the fall in activity in the real estate sector can be explained above all by the fact "that the market is adjusting to the new conditions interest rates", increased on average from 1,06% in December 2021 to 3,63% in August 2023, and not by the rules introduced in 2019 and revised several times since.

“Overall, the HCSF rules do not constitute the strongest constraint on credit today, except perhaps in certain sectors and certain geographies,” said Nicolas Namias, president of the federation, in an interview with Les Echos on Tuesday evening. French bank (FBF).

"Incomprehensible"

Contacted by AFP, Bérengère Dubus, general secretary of the UIC, the main union of real estate loan brokers whose activity is directly linked to the number of transactions, said she was "very angry at the denial of reality" and criticized “an incomprehensible decision”. She highlighted the difficulty for banks to correctly use the margin of flexibility, particularly given the time required to grant credit.

The Prudential Control and Resolution Authority (ACPR), the French banking and insurance watchdog, also a member of the HCSF, "will continue its discussions with credit institutions in order to identify any practical constraints to proper implementation of this flexibility", also declares the High Council, which remains open to "possible new technical adjustments capable of adapting the measure to the new economic and financial context".

Letter to Bercy

For months, banks, brokers and players in the real estate sector have been fighting more or less head-on against these rules, in a context of falling number of transactions, and pointing the finger at the Banque de France, Governor François Villeroy de Galhau being one of the main advocates of maintaining the existing rules.

Several presidents of Assembly committees as well as the general budget rapporteur Jean-René Cazenave recently increased the pressure by pleading, in a letter addressed to Bercy, to loosen the constraints.

According to MP Sacha Houlié (Renaissance), interviewed on Franceinfo on Sunday, Bruno Le Maire said "study this hypothesis".

After a post-Covid buying frenzy and a record 2021, the volume of real estate transactions has fallen sharply.

In July, 10,1 billion euros of real estate loans, excluding renegotiation, were granted, the lowest since April 2016 and almost half as much as in July 2022, according to the Banque de France.

As for reservations for new housing with developers, they fell by almost 40% year-on-year in the second quarter, to 18.000.

Illustrative image of the article via Depositphotos.com.