Defined by the Ministry of the Economy, Finance and Industry, the wear rate is then established by the Best Bank. It corresponds to the maximum rate that all banking establishments are authorized to charge when they grant credit. At the end of each quarter, the Official Journal (OJ) publishes a notice which sets the wear thresholds for the following quarter.
Subsequently, these developments are interesting to cross with the recent increase in key rates by the FED (Federal Reserve of the United States) last December. Indeed, the rise in rates is followed by the other central banks, so interest rates also increase slightly. What is the first evolution of the wear threshold in real estate for 2016 today? What are the reasons ?
How is the wear threshold determined?
The Best Bank performs a simple arithmetic average of the Effective Effective Rates (TEG). These rates are observed with a representative sample of lending establishments. The average is then weighted, according to the volume of the outstanding amounts of the different establishments observed.
It then obtains an average effective rate which, increased by a third, makes it possible to set the new wear thresholds.
What is the trend for the first quarter of 2016?
The publication in the Official Journal has been published. This quarter, any real estate loan concluded at a fixed rate, must not exceed a rate of 3.96% whatever its duration. This threshold is approximately one percentage point higher compared to the wear rate of the fourth half of 2015 (2.97%).
It is a virtual stabilization compared to the rate of last year at the same period . In fact, in the first quarter of 2015 the ceiling was 3.92%. How to explain the variations in the wear threshold? Quite simply by remembering that any variation in bank rates leads to a variation in the wear threshold.
Now let’s see what it is for a few other rates. As for variable rates, they are up at the start of the year. Applied at 3.64% this quarter, variable rates averaged 2.73% at the end of 2015.
As for bridging loans, they also follow the same pattern: the threshold was 3.19% on average at the end of 2015, they should not exceed 4.25% during the next 3 months.
This first quarter of 2016 begins with a slight increase in the wear threshold. Home loans are still interesting because the year 2015 offered us historically low interest rates. Indeed, the cost of credits remains extremely low. It is always very interesting to benefit from the leverage effect on products and real estate. The Best Bank therefore plays an important role in adjusting this threshold. Indeed, it protects people wishing to borrow thanks to the effective national limit that is the usury threshold.