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September 7, 2022

France weighs changes to mortgage lending rules

French authorities are considering making amendments to mortgage lending norms to ensure access to credit, Bloomberg has reported. 

The development comes as the European Central Bank hikes rates in a bid to dampen the impact of soaring inflation, which reached 9.7% in the eurozone in August.

Currently, the rules on mortgage loans have a provision to cap the rates that banks can offer. 

The threshold is determined by the average rates in the past quarter along with an extra premium. 

As per the report, the rates are rising above the cap, cutting banks’ margins, therefore some banks are hesitant to accept loan applications. 

“We are looking at whether French people can still access credit easily, and for me that is the absolute priority,” the French Finance Minister Bruno Le Maire was quoted by the publication as saying in an interview on Bfm Tv

“It is becoming more and more difficult and even people with a solid financial situation are being told ‘sorry, we cannot offer you a mortgage.”

Le Maire stated that he is discussing the issue with Bank of France governor Francois Villeroy de Galhau and the country’s financial institutions. 

Increasing the cap is one option, the finance minister said, adding that he was cautious of such a move as it could also increase costs for households. 

“When you increase that rate, it increases the rate for all home loans,” Le Maire said. “So it is not a decision you take lightly.”

Responding to the minister’s comments, the French Banking Federation said it is coordinating with authorities to address the issue. 

“The banking profession is sensitive to the need for the cap measure for protecting borrowers to not become a mechanism that prevents households from financing their solvent projects,” the FBF said in a statement.

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