The Banque de France believes that, in the current economic situation, extending credit facilities would risk pushing many households into over-indebtedness, over a long period and at rates that are too high. The Central Bank estimates that the overall debt ratio of French households is already very high: it has reached 101% of disposable income. This means that we must devote 101% – all of it – of our net income, after paying taxes, to pay our debts.
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Difficult and dangerous to allow more, especially since the indebtedness of French households is now higher than the rest of the countries of the euro zone. Since January 2022, French banks must meet certain criteria to grant a mortgage.
Among these criteria set by the financial authorities, there is the ratio between the total amount of expenses related to housing and household income. Expenses cannot exceed 35% of disposable income, and the duration of indebtedness is limited to 27 years at most.
Desirable development?
Many individuals and businesses today find banks more cautious than before. Bruno Le Maire’s services therefore want to know if the standards established against household over-indebtedness are not ultimately too great an obstacle to access to credit. Evaluation work is in progress.
Does this mean that the Banque de France and the Ministry of Finance are not on the same wavelength? In reality, everyone plays their role: on the one hand, the Ministry of the Economy, anxious to grease the wheels between the French who want to invest, and the leeway given to commercial banks for their own allow. On the other side, the Banque de France, guardian of the temple, of regulation and of monetary orthodoxy.
The two are ultimately complementary in the face of a reluctant banking federation and real estate professionals who fear a collapse in their activity, for lack of sufficient loans granted to households to invest in their homes or in stone in general.