French banks toughen up rules on mortgage lending

French banks toughen up rules on mortgage lending
Photo: PHILIPPE HUGUEN / AFP.
Getting a mortgage in France is about to become more difficult, as limits on who is eligible and how long they can borrow for are set to become legally enforceable from January 1st, 2022.

France’s financial watchdog, the High Council for Financial Stability (HCSF), announced last week that from the start of 2022, banks would be forced to respect strict rules over who they can lend to. These were previously only guidelines for banks.

This is what that means for anyone hoping to take out a mortgage on a property in France.

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Borrowing limits

The first criteria prospective borrowers will have to meet is that repayments – including insurance charges – must not exceed 35 percent of their income.

In the recommendations published in January, this referred to “income before taxes”, which should also apply to the new regulations. “Pending the publication of the new norms by the HCSF, to the best of our knowledge, the income taken into account for the 35 percent calculation refers to before tax,” the Fédération Bancaire Française told MoneyVox

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The second condition concerns the length of the mortgage – you will now be allowed to borrow over a maximum of 25 years, or 27 years in certain cases, such as when buying a new-build before completion, allowing you to defer the start of payments for two years.

Exceptions to the rules

It will still be possible to get around these rules, but banks will only be permitted to grant exemptions to 20 percent of borrowers. Within that margin, at least 80 percent of exemptions must be for primary residences, while 30 percent will concern first-time buyers.

This does not represent a radical change, since the guidelines have already had an impact on lending practices. According to the HCSF, 20.9 percent of mortgages currently do not conform to the new rules, down from 48.3 percent at the beginning of 2020.

Who will be affected?

Young, first-time buyers could be impacted by the rules, particularly if they do not have large savings. Indeed, it is increasingly common for buyers to be required to pay around 10 percent of the house price as a deposit, and with new time limits on repayments, it could become even more important to have a deposit.

“Above all this will impact the least well-off first-time buyers who won’t meet the requirements and for whom banks, which are used to choosing clients according to their profiles and solvency, will no longer be able to breach the HCSF’s rules,” Philippe Taboret, general director of Cafpi mortgage broker, told LCI.

Maël Bernier, spokesperson for brokerage company Meilleurtaux, warned Le Parisien there could be “a divide between the most well off/oldest, who have large amounts of savings and can continue to benefit from exceptionally low rates,” and “the youngest, without savings, who will have to wait to have sufficient savings in order to access the property ladder”.

Indeed, mortgage rates reached a record low of 1.05 percent in August.

The new regulations could also have an impact on buy-to-let properties.

As Les Echos has highlighted: “Previously deducted from the monthly mortgage repayments (which were therefore largely reduced), for the past few months [rental income] is simply added to your income,” meaning its importance is diminished when calculating the 35 percent figure.


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  1. As the article points out, the ‘new’ rules have been in practice throughout 2021. While it is better to have a downpayment it is still possible to borrow 100%(+ even) with certain lenders.
    There are also other solutions available in instances when mainstream lenders would normally decline a loan.

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