WEAR RATE. Since March 1, 2023, the attrition rate has dropped from 3.79% to 4%. Enough to grant more credits, but not only.
[Updated Mar 3, 2023 4:25 PM] The rate has increased again. Since March 1, 2023, it has reached 4% for a fixed rate loan over twenty years. As a reminder, the usury rate makes it possible to define the maximum legal rate at which banks and credit institutions are authorized to practice when they grant you a mortgage. Good news for borrowers, this new measure should allow banks to grant more credit. In summary, the banks will be able to adjust their trade policy and release funds that are currently locked. But the flip side of the coin lies elsewhere. If it will be easier to borrow, the cost of credit will be higher. Indeed, this operation could contribute to a certain sharp rise in rates. Currently, the average rate of a loan over twenty years is 2.9% against only 1% in February 2022. A trend that is not ready to be reversed.
Above all, the usury rate makes it possible to protect a borrower against excessive rates that could be offered to him by various credit institutions. In other words, it makes it possible to avoid situations of serious over-indebtedness for an individual, and on a larger scale, the destabilization of the global economy. It therefore plays a regulatory role. It applies to home loans, consumer loans, account overdrafts, or revolving loans.
It is the Banque de France which sets the rate of wear. It is based on the average effective rates applied by credit institutions increased by one third. The thresholds vary according to the amount borrowed, the duration of the loan and the category of loan chosen (consumer credit or revolving credit for example).
In 2022, the evolution of the real estate market is more than doubtful and uncertain. Since the beginning of 2022, interest rates have been rising faster than this famous rate of wear. De facto, many mortgage applicants are denied their loan application. A study by Opinion System, commissioned by the French Association of Bancassurance Intermediaries (AFIB) even affirms that since January 2022, this increase in the rate of wear and tear is responsible for the refusal of 45% of mortgage applications from banks. This is why some professionals in the sector are asking for a change in the method of calculating the wear rate by increasing it by two thirds, instead of one third.
