Loans over 27 years, re-examination of files... The Ministry of the Economy and the Bank of France, gathered in the High Council for Financial Stability (HCSF), decided on Monday to adjust the rules governing real estate credit at the margin in order to restart the market. The HCSF "has decided to make three technical adjustments (...), taking note of certain operational difficulties" noted in particular by the banks, it wrote in a statement.
In detail, the latter will be able to derogate from the maximum loan term limit of 25 years, to go up to 27 years, if work represents 10% of the total amount of the operation.
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The HCSF also decided to "allow credit institutions to exclude the interest expense associated with bridging loans" in the calculation of the effort rate. That is, the total amount of housing-related expenses relative to income, left at 35%. However, there is a problem: the amount of the bridging loan must not exceed 80% of the value of the property sold.
Finally, banks will have more flexibility to deploy their quota of exceptions to the rules for granting credit, which will remain at 20%. They will be able to exceed this limit in one quarter from time to time if they manage to maintain the 20% limit by counting the following two quarters.
"Making relationships with borrowers even more fluid"
The HCSF has also spoken out in favour of an agreement for a second-level examination of refused credits, an idea launched by the governor of the Banque de France François Villeroy de Galhau on 17 November and recently taken up by Bruno Le Maire.
The aim would be to "make relations with borrowers even more fluid, either by giving more explanations when a loan is refused, or possibly in the event that the borrower is solvent, to be able to carry out a review under new conditions of the granting of credit", according to a source close to the HCSF. The application of this "transitional and temporary" mechanism would take place at the beginning of February, according to the same source. It will be done on a case-by-case basis, at the request of the loan applicant.
The objective of the HCSF is to restart the production of real estate loans, which has fallen below 10 billion euros per month since August, according to the Banque de France. Not seen for more than 7 years.
The rules for granting mortgages, including their duration and weight in relation to borrowers' income, are reviewed quarterly by the High Council, a body chaired by the Minister of the Economy and on which the governor of the Banque de France sits.