Minister of Economy Bruno Le Maire Announces Expansion of Zero-Rate Loan System to Revive Real Estate Credit

While the real estate market is going through a historic crisis, the government is seeking to revive credit production. So that a “maximum number of French people” have the means to borrow, while today, it is becoming “extraordinarily difficult because of the increase in rates”, the Minister of the Economy Bruno Le Maire has just announce that the zero-rate loan will be “increased and extended” in 2024.

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The extended PTZ: a positive, but insufficient reform?

This PTZ, as it is called, allows first-time buyers to limit the cost of financing their main residence, in new buildings, or if they carry out work to improve its energy performance, in old buildings. Initially, the system was to be eliminated on January 1, 2024, it will be extended. The maximum authorized borrowing envelope will increase from 80,000 to 100,000 euros. “Six million more people” will be eligible, i.e. those whose income is between 2,500 and 4,500 euros per month. Finally, 210 additional towns will be added to the list of municipalities where these loans can be taken out.

“It’s a reform that goes in the right direction,” said Laura Martino, director of banking partnerships and strategic marketing for the real estate loan broker Cafpi. The specialist believes, however, that “we must go further, because the acquisition of individual houses remains excluded from the system”. Regarding the extension of the system to the middle classes, Laura Martino points out that “the resource ceiling to be eligible for the PTZ had not been reviewed since 2016. It is therefore rather a matter of catching up to take into account takes into account inflation and changes in wages, rather than a significant expansion of the system.

The question of relaxing the rules for granting credit

Bruno Le Maire also confided that he “worked a lot” with the governor of the Bank of France on the question of relaxing the rules for granting credit. This is a point that “matters a lot because it is what frees up the supply of credit from banks,” he said. Here again, the brokerage specialist gives satisfaction. “Many populations are excluded from borrowing because of these rules.” Among these, setting a maximum debt rate of 35% for a borrower, when the maximum duration of a loan reaches 25 years, makes players in the sector cringe.

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Although banks have the possibility of exceeding this rate in 20% of the files they handle, Laura Martino would like “the threshold to be raised, or even eliminated, or to add a criterion: the remainder to live”. The director explains that many potential buyers, if they were 35% in debt, would still have “plenty to live on” and that there is no crisis of over-indebtedness among owners. “Banks have sufficiently efficient criteria and analysis of solvency risks.”

The usefulness of granting loans at subsidized rates

On BFMTV, this Tuesday, October 17, Bruno Le Maire gave himself “six months for us to arrive at a loan at a subsidized rate that makes sense”. This again involves helping households to become homeowners by granting them loans whose rates are roughly half lower than traditional rates – around 4% today. “It is a device which has the same purpose as the zero-interest loan, that of reducing the cost of credit,” notes Laura Martino. “Perhaps it is better to broaden the existing systems than to add one, at the risk of complicating the already wide range of aid for first-time buyers.”