Conditions for granting mortgage loans

The maximum debt ratio rises from the current 33% to 35%

Borrowers will now be able to have a maximum debt ratio of 35% of their net income compared to 33% previously, a limit that was often crossed, especially for first-time buyers with small deposits and investors. "In 2020 we sometimes had credit refusals for a debt of 33.1%, which does not make sense, or other cases where borrowers had to add € 10,000 of personal funds to fall back below the threshold by 33%! Having this possibility of going up to 35% of debt, will make it possible to avoid these situations which have led to senseless loan refusals, and to facilitate first-time buyers to become homeowners, including in large cities where prices are sometimes high… All this of course under conditions of having sufficient remaining funds to live and appropriate deposits, because the banks will remain vigilant on this point in order to limit the risk ”, reports Julie Bachet, general director of the real estate loan broker Vousfinancer.

Deferred amortization in new-build

While the HCSF urged banks not to exceed a 25-year credit term, the French financial system supervisory authority now allows deferred amortization within a 2-year limit to integrate construction times into new-build projects, in particular for sales in the future state of completion and construction contracts for single-family homes. Concretely, this will allow households buying a new off-plan apartment or having their house built to benefit from a 27-year loan (25 years + 2 years grace period). As a result, their debt capacity will increase because it had more recently been calculated over a period of 23 years maximum (23 years + 2 years of deferral).

Increased room for maneuver

Finally, the HCSF now allows banks to deviate from its recommendations up to 20% of their loan production against 15% (while still being targeted at first-time buyers). This therefore offers more leeway to study lending files on a case-by-case basis, especially for those who have a significant remaining amount to live on. The remaining personal income (with which to live on) corresponds to the share of the income that a household has left to finance its current expenses, after the loan charges have been paid, including consumer loans. The High Council has also confirmed that it intends to make its recommendations legally binding from the summer of 2021.

Approvability of loan requests

In the end, this gives hope for an improvement in property market demand in 2021 by potentially approving households that previously would have been denied loans despite rates remaining low, in particular for new-build housing purchases.

Maël Bernier, spokesperson for the broker Meilleurtaux, wonders however about the fact of continuing to impose constraints on French banks when they are perfectly capable of developing their own risk policy as they did perfectly in the past, knowing that the mortgage default rate has never been very significant (less than 1%). A French system which also has the habit of imposing not only a financial guarantee on the loan (surety or mortgage) but also borrowers default insurance. "We continue to think that the easiest way would be to leave the banks with the right to do what they know how to do, namely the analysis of a file on a case-by-case basis, depending on the profile, and especially taking into account remaining income with which to live on, ”concludes Maël Bernier.

Updated date : 04/12/24
Creation date : 11/01/21

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