[Mise à jour du jeudi17 novembre 2022 à 10h06] After the discontent of the credit intermediaries, that of the notaries. “If the usury rate may have been a problem in recent months, its increase on October 1 is a breath of fresh air”, acknowledge the French notaries in their latest housing situation report, published on Monday 14 November. “But, they continue, it should be noted that some buyers fear seeking a quick signing to escape a planned rate hike. For several months now, commercial banks’ room for maneuver has been reduced by this narrowing of the spread between usury rates in force and the rate of the 10-year OAT The credit offer is therefore automatically limited and transforms a necessary consumer protection tool into a bad credit tool, even a credit exclusion tool, even for good profiles that do not reach the maximum leverage ratio of 35%. An insufficient or excessively deferred increase in usurious rates, at different rates from bank rates, therefore creates a bottleneck which paradoxically complicates access to mortgages and therefore effectively excludes some families.”
We recall that the usury rate, which is nothing more than the maximum effective annual rate at which banks have the right to lend money, is calculated quarterly by the Banque de France. The latter applies a calculation formula defined by law on the basis of the rates applied by the banking institutions in the previous three months. A problem that brokers have been hammering away for several months, at a time when the ECB is responding to rising inflation by raising its key interest rates, thus leading European banking institutions to pay more to refinance with it and ultimately to increase their hourly rate accordingly.
In favor of a usury rate “updated every month and not every quarter, in order to better take into account the reality of the market, the minister delegated to the city and housing, Olivier Kleinmet the Governor of the Banque de France on 3 November.
Should we therefore expect a reduction in the gap between the rates taken into consideration in calculating the usury rate and the current market rates? “We are vigilant on the issue of access to mortgages, especially for new buyers,” Olivier Klein told Le Figaro, who plans to “discuss regularly over the next few months” with François Villeroy de Galhau. As a reminder, the next usury rate update is scheduled for the end of December.
What is the usury rate?
The usury rate, also known as the “usury threshold”, is defined as the maximum effective annual rate (APR) at which a loan can be granted to a private individual by a credit institution. Any loan offered at a higher rate is considered usurious. The usury rate is regulated by article L314-6 of the Consumer Code. It is established by the state in order to protect borrowers from possible abuses by banks and credit institutions.
The usury rate depends on the type of loan, the amount and the term of the loan. A special distinction is made between consumer loans and real estate loans. For example, real estate loans and loans for works over €75,000 are divided into five categories:
- Fixed-rate loans with a duration of less than 10 years;
- Fixed-rate loans with a term of between 10 and less than 20 years;
- Fixed-rate loans with a term of more than 20 years;
- Variable rate loans;
- Bridge loans.
To calculate the usury rate for a given loan category, the Banque de France takes the average effective rate charged by credit institutions for a quarter and increases it by a third. The data obtained constitutes the usury rate for the following quarter.
What is the dropout rate in 2022?
For example, the average effective rate applied in the 3rd quarter of 2022 by credit institutions for mortgages exceeding 75,000 euros over a period of between 10 and 20 years was 2.27%. As a result, the usury rate for these same loans in Q4 2022 is 3.03%.
| Average Effective Rate Charged a Q3 2022 |
Usury rate applicable on October 1, 2022 | |
| Fixed-rate loans with a term of less than 10 years | 2.27% | 3.03% |
| Fixed rate loans with terms between 10 years and less than 20 years | 2.27% | 3.03% |
| Fixed-rate loans with a term of 20 years and more | 2.29% | 3.05% |
| Variable rate loans | 2.19% | 2.92% |
| Bridge loans | 2.55% | 3.40% |
When is the usury rate updated?
The usury rate is published in the Official Gazette by the Banque de France at the end of each quarter for the following quarter. It is also displayed in the “Rates and prices” section of the “Statistics” category of the Bank of France website. The usury rate is detailed for all loan categories.
Who sets the usury rate?
The usury rate is set by the Banque de France, which is the central bank of France. Indeed, the Banque de France has monetary, financial and economic missions. Among the services to the economy we find in particular the protection of families from over-indebtedness. Part of the Banque de France, the Prudential Supervisory and Resolution Authority (ACPR) monitors banking and insurance business.
In the eyes of lenders, some borrowers are at a higher risk of default. This is the case of the elderly or of certain people who exercise a risky profession. The interest rate charged to them then exceeds the usury rate and the bank refuses to lend money. To avoid this overrun and be eligible for a loan, you can gamble on the TAEA (annual effective rate of insurance) by taking out cheaper borrower insurance at another institution.
Penalties for exceeding the usury rate
Article L341-50 of the Consumer Code provides for penalties for credit organizations that exceed the usury rate. Usury is punished with a 2-year prison sentence and a fine of 300,000 euros. The conviction may be accompanied by other sanctions, such as disqualification from exercising certain professional activities for a maximum period of 5 years.
