Since January 1, 2022, French banks must meet certain criteria, defined by the High Council for Financial Stability. Game / stock.adobe.com
The financial institution warns against a risk of household over-indebtedness.
The Banque de France estimates in a note that a relaxation of the current conditions for granting mortgages, which Bercy is considering, “could push many households into situations of over-indebtedness“. Faced with a decline in the granting of real estate loans, the Ministry of the Economy indicated on Tuesday that “evaluation work” were “being carried out» concerning the conditions of access to credits.
Since January 1, 2022, French banks must meet certain criteria, defined by the High Council for Financial Stability (HCSF), to grant a mortgage: an effort rate, i.e. the total amount of expenses related to housing in relation to income, of 35% maximum and a debt period of 27 years at most in certain cases (such as work prior to moving in).
However, establishments have the possibility of derogating from these criteria for 20% of loans but, according to the Banque de France, this flexibility “is only partially used by banks, at 14.5%“. For months, several real estate players have been sounding the alarm, saying they fear a collapse in loans granted in the last quarter of 2022.
Read alsoThe government plans to relax the criteria for granting mortgages
Risk of household over-indebtedness
In a note dated Wednesday published on its site, the Banque de France estimates that “modifier» the protection standards currently in place «would not change the normal mortgage cycle; on the other hand, this would risk pushing many households towards situations of long-term over-indebtedness and higher rates».
«It would be the worst time to do so, when French household debt, at 66% of GDP, is already higher than the rest of the euro zone and all our big neighbours. Beyond any marginal developments, it is important not to upset the healthy financing of real estate as the basis for the sustainable development of this sector.“, she believes.
The Banque de France judges that “the lower production of mortgage loans, which follows several years of very strong credit growth at very low rates, is now above all explained by the lower demand from households“, Who “have satisfied many of their demands during these years, including until the first half of 2022. They quite logically expect the stabilization of real estate prices“, according to her.
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