France is considering changes to mortgage lending rules to ensure credit to households as the European Central Bank delivers sharp rate increases to counter surging inflation.
(Bloomberg) — France is considering changes to mortgage lending rules to ensure credit to households as the European Central Bank delivers sharp rate increases to counter surging inflation.
At present, French regulations cap rates that banks can offer based on average rates in the past quarter plus an extra premium. Some banks have become reluctant to accept loan applications as rates are rising above the cap, depressing margins.
“We are looking at whether French people can still access credit easily, and for me that is the absolute priority,” French Finance Minister Bruno Le Maire said in an interview on BFM TV Tuesday. “It is becoming more and more difficult and even people with a solid financial situation are being told ‘sorry, we can’t offer you a mortgage’.”
Le Maire said he is in talks with Bank of France’s governor Francois Villeroy de Galhau and the nation’s financial institutions on the matter and increasing the cap is one option.
Still, the finance minister said he was cautious about changing the rules as it could also drive up costs for households.
“When you increase that rate, it increases the rate for all home loans,” Le Maire said. “So it’s not a decision you take lightly.”
In response to Le Maire’s comments, the French Banking Federation said it is working with the authorities on exceptional measures to ensure that rules continue to protect borrowers while not excluding them from access to credit.
“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.
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