He wants a borrower to be able to change insurer without this affecting the interest rate of his mortgage loan.
Linking the level of the interest rate of a mortgage loan to the conclusion of one or more insurance contracts with the same company is a very common practice and moreover perfectly legal. But is it in the interest of the borrower? He certainly gets a reduction in the interest rate but he may pay a little more for his insurance.
The Deputy Prime Minister in charge of the Economy, Pierre-Yves Dermagne (PS), filed a draft bill aimed at maintaining the conditional reduction granted when taking out a loan even if the borrower decides to change insurer, after having complied with a two-year period. This initiative was welcomed by consumer organizations during the analysis of the text by the Consumption Advisory Commission (a body placed under the aegis of the Central Economic Council). “Financial institutions, which sometimes dangle consumers with a very attractive interest rate, must compensate for this low interest rate with insurance products, they say. Consumers are, so to speak, blinded by the interest rate offered and therefore fail to explore the market. This leads to consumers overpaying and brokers and freelancers being denied a fair chance.”
A transparent agreement
On the side of Febelfin, we do not share this point of view. “The grouped sale is not an obligation but a transparent agreement between the bank and the customer, we are told. The client knows what he is committing to, he knows that the fixed interest rate is conditional.” If tomorrow the borrower can sweep away these conditions, the lenders will undoubtedly be less inclined to grant an interest rate reduction. And it is by no means certain that the potential gain on insurance premiums compensates for the rise in interest rates. Numerical illustration of Febelfin: for a loan of 300,000 euros over 25 years, with a discount of 0.65%, it would be necessary to find 1,268 euros each year on fire insurance premiums and outstanding balance to neutralize the impact of the suppression discount.
Pierre-Yves Dermagne’s text also provides for limiting sales coupled to products having “a substantial link” with the credit agreement. This is the case for fire or the outstanding balance, much less for car insurance or pension savings.
