The authorities are resisting the attacks from those demanding a change in borrowing conditions. The High Financial Stability Council (HCSF), which brings together the Minister of the Economy and the Governor of the Bank of France, decided this Tuesday, September 26 to maintain the rules for granting real estate credit, judging that a relaxation would not resolve market difficulties.
Today, banks can deviate from the criteria in force for part of the credits they grant, but are far from fully using this room for maneuver, which makes the HCSF say, in a press release, that the establishments “have therefore margins to further increase their credit offer” while respecting current rules.
“The market is adjusting”
To combat over-indebtedness, banks are not allowed to lend money if monthly payments exceed 35% of income, nor for a period of more than 25 years. However, they can deviate from these criteria in 20% of cases, provided that this primarily concerns main residences and targets, in almost a third of cases, first-time buyers. However, the HCSF notes that banking establishments only deviate from the rules in 13.8% of cases, and that exemptions excluding the purchase of a main residence, which can only represent 6% of the total credits granted, do not apply. only rise to 2.4% of the total.
According to a source close to the body, the prevailing feeling today is that the fall in activity in the real estate sector is explained above all by the fact “that the market is in the process of adjusting to the new conditions interest rates”, increased on average from 1.06% in December 2021 to 3.63% in August 2023, and not by the rules introduced in 2019 and revised several times since.
For months, banks, brokers and players in the real estate sector have been fighting more or less head-on against these rules, in a context of falling number of transactions, and pointing the finger at the Banque de France, Governor François Villeroy de Galhau being one leading advocates for maintaining the rules.