The French High Authority for financial stability has taken measures to prevent consumers from developing unmanageable debts and is now formally restricting the terms and conditions to mortgages that can be granted by French banks. Previously these measures were only recommended as best practice and not mandatory.
The measures, due to become mandatory and apply to all French banks on 1 January 2022, will limit mortgages to a maximum term of 25 years. The borrowed amount, including the associated insurance policy which in France is mandatory, will be capped at 35% of the borrower’s income, though banks will be allowed to make exceptions in 20% of the mortgages that they grant. Importantly, the income taken into account when calculating the maximum amount that can be borrowed will not include any income that may be made from renting out the property being purchased.
The High Authority reports that currently slightly more than 20% of the mortgages granted are in contradiction of those rules, so not far off the leeway margin which the mandatory rules will grant to banks. On that basis, it does not expect that this will have much of an impact on the property market, especially with the average interest rate at an all-time low in France (1.05% in August), but there are concerns as to the consequences of such restrictions should the interest rates go back up.
If you are considering purchasing a property in France and are concerned that the new regulations may impact your ability to obtain a French mortgage to finance your purchase, there are only a few months left to make a mortgage application and receive an offer before the new rules become mandatory.
