The burden of household mortgage debt is easing
Nearly 1300 billion euros. This is the amount of debt real estate households, in France, according to the Bank of France (figure stopped in February 2023). By way of comparison, that of the State is around 3000 billion euros. In 20 years, household mortgage debt has more than quadrupled (273 billion euros in 2000). And as the country’s GDP is growing at a slower rate, the weight of this debt in French wealth is soaring (see the graphs below). It has more than tripled since 2000, from 15% to around 53%! The high credit rates at the beginning of the century and then the surge in real estate prices are not unrelated to this. Good news: the situation seems to be stabilizing.
It is in this context that a showdown has begun between Bercy and the Banque de France. At the heart of the debate: the 35% rule. For two and a half years, a mortgage borrower cannot go into debt for more than 35% of his disposable income. The Minister of Economy and Finance Bruno Le Maire wants to see this rule lightened. To the chagrin of the Banque de France. “Changing these protection standards would not change the normal mortgage credit cycle but would risk pushing many households towards situations of long-term over-indebtedness and higher credit rates“Explains the Banque de France, which adds that such a change would happen”at the worst time“. After peaking at over 67%, (overall) household debt seems to be stabilizing but remainshigher than the rest of the euro zone and all our big neighbors (see below)”.
Affluent households deprived of credit
An analysis disputed by many mortgage players. “This 35% rule is too restrictive because it does not take into account the rest to liveanalyzes Pascale Sciacalugua, deputy director of the Crédit Coopératif network. However, it is possible to go beyond the 35% debt ratio and therefore to increase the borrowing capacity, when the rest of the living is comfortable and covers the monthly expenses of the purchaser.“. In 2 years, the share of households whose debt ratio is out of the nails has gone from 22% to 30%, according to Meilleurtaux. These are all potential borrowers who risk being excluded from the market. And not just the humble. “This criterion also prevents wealthy households from obtaining creditwhen they could devote more than 35% of their income to repaying a mortgage without upsetting their quality of life or creating a situation of over-indebtedness“, deciphers Yann Jéhanno, president of the Laforêt group.
Bad news for the government. Because who says real estate market at half mast, says transfer taxes (or “notary fees”) down and therefore less tax revenue for the state coffers. This is why Bercy wishes to relax this 35% rule which risks causing a crisis in the real estate market. Sales have been at a standstill since the beginning of the year and credit production has completely collapsed: only 12 billion euros in February, according to the Banque de France. It was two almost twice as many in May 2022. Unheard of for 3 years!