Real estate crisis: lending conditions will not be eased.

On Tuesday, September 26, the High Council for Financial Stability decided to maintain the regulations governing mortgage loans amid a decline in transactions. Despite the crisis, no changes were made.

The High Council for Financial Stability (HCSF), which includes the Minister of Economy and the head of the Bank of France, has decided to maintain the rules for providing mortgage loans, believing that easing them will not solve the problems in the market. Currently, banks can deviate from the existing criteria for some of the loans they provide, but they are far from fully utilizing this option. The HCSF stated in its message that institutions "have the opportunity to further increase the supply of loans," while adhering to the existing rules.

To combat the overload of debts, banks are not allowed to provide loans if the monthly payments exceed 35% of income or if the loan term exceeds 25 years.

However, they can deviate from these criteria in 20% of cases, provided that it primarily concerns primary residences, and in 30% of cases, it applies to first-time buyers. However, HCSF notes that banking institutions deviate from the rules only in 13.8% of cases, and deviations related to non-primary residence purchases, which can account for only 6% of the total number of loans granted, make up only 2.4% of the total.

According to a source close to this body, the prevailing sentiment is that the decline in activity in the real estate sector is primarily explained by the fact that "the market is adapting to the new interest rate conditions," which have increased on average from 1.06% in December 2021 to 3.63% in August 2023, rather than the regulations introduced in 2019 that have been revised multiple times since then.

For several months, banks, brokers, and real estate market participants have been struggling against these rules to varying degrees amid a decline in the number of transactions, pointing to the Bank of France, whose president is François Villeroy de Galhau, as one of the main advocates for maintaining the rules. Several chairpersons of committees in the National Assembly, as well as the general rapporteur for the budget, Jean-René Cazeneuve, have recently intensified pressure by calling in a letter sent to Bercy for the easing of restrictions. According to MP Sasha Ullié (Renaissance), who spoke on Franceinfo radio on Sunday, Minister of Economy Bruno Le Maire stated that he is "considering this hypothesis."