Market Update: Usury Rate and Mortgage Interest Rates
The recent increase in mortgage interest rates, combined with an unusually low usury rate, has created a bottleneck in the French mortgage market. Many households, including financially sound buyers, are now facing loan refusals, slowing down property transactions, including in the luxury real estate market in Paris and across France.
A sharp rise in mortgage interest rates
During the first half of 2022, mortgage rates increased rapidly, reaching close to 2% over 20 years, compared with around 1% at the end of 2021.
Despite this rise, borrowing costs remain relatively attractive when compared to current inflation levels.
This increase should nevertheless be seen as a return to normal after several years of exceptionally low interest rates, rather than a structural crisis in the mortgage market.
The usury rate: a major obstacle to mortgage financing
The main issue lies in the slow adjustment of the usury rate, which represents the maximum all-inclusive rate at which banks are legally allowed to lend.
As of 1 July 2022, the usury rate for mortgage loans with maturities of 20 years or more stands at 2.57%. This level remains insufficient for banks to grant loans while maintaining acceptable margins.
As a result, many borrowers face loan refusals, as the APR (Annual Percentage Rate)—which includes interest, insurance, guarantees and fees—often exceeds the usury threshold. Older borrowers are particularly affected due to higher insurance costs.
What are the short-term outlooks?
Visibility remains limited in the short term. Industry players have urged authorities to adapt the current system. Several solutions are being considered, including an early revision of the usury rate, a change in its calculation method, or even a temporary suspension in exceptional market conditions.
Mortgage production levels in the coming weeks will play a key role in determining future decisions.
Tailor-made mortgage solutions for your property projects
Do you have a real estate project, whether residential, investment-driven or luxury-oriented?
In this challenging environment, professional guidance is essential.
Exell Crédit supports clients with bespoke, confidential and efficient mortgage solutions, perfectly tailored to individual profiles and high-end real estate projects.
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