Trouble for real estate actors: no easing of lending rules

The High Council for Finance (HCSF), which regulates lending rules, believes there is no need to relax mortgage lending rules, despite the fall in activity, because existing flexibilities are not being utilized by banks. The HCSF argues that the number of exemptions to these rules, which can account for up to 20% of total loans, is not being achieved.

This decision has caused dissatisfaction among credit market participants, particularly brokers. HCSF states that deviations from the maximum debt level concern only 13.8% of applications, while the maximum level is 20%. A cold shower for all real estate market participants, including brokers.

As the number of loans issued continues to fall due to rising interest rates and more difficult terms and conditions, hopes of relaxing the rules have been dashed by the regulator. The Supreme Council of Finance (HCSF) decided this week to retain the 35% maximum arrears rules and the 20% exception for applications. That is, 80% of loan applicants will still be denied a loan if their payments exceed 35% of their net pre-tax salary (including insurance, notary fees, commissions, etc.).

This disappointment is particularly great since Economy Minister Bruno le Maire, who is also chairman of the HCSF, "had considered this hypothesis," Sacha Houlié (Renaissance), chairman of the legislative committee of the National Assembly, said on Monday. The hope was dashed by the regulator, which is postponing a possible easing of credit rules until December, "depending on the change in the number of exemptions provided by the banks," the HCSF's entourage specified.

The lending rules are not the cause of the difficulties in the lending market according to the HCSF. According to this body, the situation on the mortgage market is indeed difficult, but this does not justify amending the rules at this time.

However, according to the HCSF, "the slowdown in credit to the private non-credit sector mainly reflects the effectiveness of monetary policy, rising interest rates reduce the demand for credit". Thus, the high council has no concern that credit is being hampered, and its decision is justified by its main argument, "the production of 'nonconforming' loans related to this flexibility is only 13.8% of total loan production in the second quarter of 2023, with a possible maximum of 20%," the organism states. "We are starting to see an increase in the number of exceptions, but this is still just the beginning, which justifies keeping the rules in place," confirms the HCSF environment.

The regulator wants to prove itself decisive by showing that its main objective is not to make lending more difficult and it primarily wants to "avoid losing control over the distribution of mortgages and increasing bad debt," says the body's entourage. That rationale doesn't convince professionals, who believe the 35% maximum "is dogmatic," says Caroline Arnould. "We want this norm to be abolished and a maximum level for the rest of life is set, because when the norm has to be changed by 10%, 20% exceptions, it means it is poorly harmonized," adds the director of Cafpi.

Reform is likely to remain at the dream level.

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