Usury rate : definition and calculation of the quarterly threshold
The statutory ceiling on the cost of credit granted to an individual is based on the APRC: as soon as it exceeds the applicable threshold, the loan becomes usurious. The usury rate is calculated using the average rates for the previous quarter, increased by one third.
The usury rate sets the legal cap on the total cost of a loan granted to an individual, association or local authority. For property finance, it is not only the nominal rate that matters, but the APR, meaning the annual percentage rate including interest and certain compulsory fees. If this APR exceeds the threshold published for the relevant loan category, the bank is not allowed to grant the loan.
For buyers on the Alabaster Coast, this mechanism has a very tangible consequence: it protects against overly expensive offers, but it can also block an application when borrower insurance, guarantees or fees push it above the ceiling. According to the Banque de France, this threshold is calculated from the average rates applied in the previous quarter, then increased by one third.
Key points to remember
- The usury rate is the maximum legal APR that a lender may apply to credit granted to an individual.
- A loan becomes usurious if its APRC exceeds the threshold in force when it is granted.
- Banque de France calculates this threshold every quarter based on the average rate observed in the previous quarter, increased by one third.
- From 1 February 2023 until December 2023, the review was monthly on a transitional basis; it then reverted to quarterly.
- For a mortgage, the APRC includes, in particular, the interest rate, borrower insurance, guarantees and certain fees required to obtain the loan.
What this cap exactly covers
The usury rate is the maximum level that credit institutions may apply when granting a loan to an individual, association or local authority. For an individual borrowing to buy a home, the relevant check is not the nominal rate advertised by the bank, but the APR.
Banque de France points out that the APRC is an “all-inclusive” rate. It notably includes:
- the nominal interest rate of the loan ;
- fees paid or owed to intermediaries involved in granting the loan, where these fees determine the granting of the credit or the terms advertised;
- insurance and mandatory guarantee costs, following the same logic.
Service-Public.fr also specifies that, when comparing several property offers, it is the APR that should be considered. It takes into account, in particular, the interest rate, the cost of borrower insurance, the cost of guarantees, fees payable to intermediaries, the cost of valuing the property, excluding registration fees related to the transfer of ownership, as well as other fees required to obtain the credit.
Two offers with similar nominal rates may therefore result in different APRs. This is often the point at which compliance with the statutory threshold is determined.
Why this mechanism exists
The purpose of the usury rate is primarily protective. According to the Banque de France, it aims to prevent borrowers from being offered excessively expensive loans and subsequently finding themselves in a difficult financial situation.
This ceiling therefore has a dual function:
- it sets the maximum cost of a loan;
- it prohibits lenders from granting credit with an APR higher than the applicable threshold.
When an application is rejected because the usury rate has been exceeded, this does not necessarily mean that the borrower has a weak profile. The excess may result from adding together several components of the cost of credit, particularly insurance and guarantees.
How the Banque de France calculates the quarterly threshold
For each loan category, the law uses as its basis the average rate applied during the previous quarter, then adds one third. To establish this average rate, the Banque de France surveys credit institutions and finance companies every quarter.
The calculation therefore follows a two-stage approach:
- observe the average APRs applied during the past quarter, for each loan category;
- increase this average effective rate by one third to obtain the threshold applicable to the following quarter.
Each revision is published in the Official Journal. The various thresholds can also be viewed on the Banque de France website.
Why people spoke of a monthly revision in 2023
The normal system is quarterly. However, from 1 February 2023 to December 2023, the revision was monthly. The Banque de France explains that this adjustment was temporary, during a period of rising interest rates, to prevent a delay within the same quarter from postponing loan arrangements to the following quarter.
This exceptional monthly setting has come to an end. The Banque de France indicated at the time that the return to quarterly setting was explained by changes in the Eurosystem's key rates, the retention of the Livret A rate at 3% at that date and the decline in long-term rates. The stated aim is also to give borrowers greater visibility.
Today, to understand whether financing can go ahead, you therefore need to look at the quarterly threshold applicable to the category of loan concerned when the credit is granted.
What can cause the cap to be exceeded in a property application
When planning a purchase, many borrowers first focus on the interest rate. However, exceeding the usury rate depends on the APR, not just on the nominal rate.
Service-Public.fr points out that the total cost of the operation to be financed may include, in particular:
- the sale price of the dwelling or the construction cost, and possibly the price of the land ;
- the cost of the lender’s guarantee;
- notary fees;
- borrower insurance application fees;
- the broker’s remuneration;
- the estate agent’s remuneration.
All these elements are not automatically included in the APR in the same way, but several of them may contribute to it when they are required to obtain the loan or the advertised terms. This explains why an apparently straightforward application may be rejected under the usury rate rules even when the nominal rate seems reasonable.
For a VEFA purchase, Service-Public.fr also specifies that interim interest is not taken into account when calculating the APR.
Why this threshold can both block and secure financing
The usury rate safeguards financing because it sets a legal limit on the total cost of credit. It prevents a borrower from accepting a loan whose cost would be excessively high.
But this same ceiling can also block an application. If, when the loan is granted, the APR exceeds the applicable threshold, the loan is usurious and granting it is prohibited.
| Concept | What it measures | What you need to check |
|---|---|---|
| Nominal rate | The rate used to calculate the loan interest | That alone is not enough to determine whether the credit complies with the ceiling |
| APR | The total annual cost of the credit, including interest and fees | This is the rate to compare with the usury rate |
| Usury rate | The maximum legal APR allowed | If the APR exceeds it, the loan cannot be granted |
For a buyer, the real question is therefore not just “what interest rate am I borrowing at?”, but “what is the total cost included in the offer?”.
What should I do if a bank refuses the loan because of the threshold
Banque de France suggests several practical options. If you have only run simulations with one bank, you can contact other credit institutions.
This competitive tendering does not guarantee that you will obtain credit with an APR remaining below the threshold. It may nevertheless enable you to compare the main components of the APR, particularly the nominal rate and borrower insurance. Service-Public.fr also points out that, for the same property project, one bank may make a different proposal from another and that the borrower is free to compare several offers.
The bank cannot impose its choice of insurer on you. It may require borrower insurance and define the risks to be covered, but you can choose who insures you under the conditions set by the bank.
When the project is already well advanced, it is also useful to reread the European standardised information sheet, provided free of charge no later than when the mortgage offer is made. It makes it easier to compare offers. You can also consult the Service-Public.fr information sheet to check the stages of the mortgage process, the 10-calendar-day reflection period and the minimum 30-calendar-day validity period of the offer.
A practical point to watch out for when buying on the Alabaster Coast
When the purchase budget is added to guarantee fees, more expensive insurance or ancillary costs, the risk of going over budget is worth checking early. This is particularly useful before committing to a property, whether it is a flat or a country house. To get a sense of the typical prices of properties currently available locally, Cabinet Soudey features houses and flats on the Alabaster Coast as well as a free property valuation service for sellers.
Frequently asked questions
What is the difference between the interest rate and the usury rate ?
The interest rate is the remuneration for the amount lent. The usury rate, on the other hand, is the legal cap on the APR applicable to a loan. A loan may therefore have an acceptable interest rate, but become impossible if its APR exceeds the legal threshold.
How to know whether my loan offer exceeds the threshold ?
You must compare the APR stated in the mortgage offer or in the ESIS with the applicable usury rate for the loan category. It is not the nominal rate that must be checked. If the APR exceeds the threshold when the loan is granted, the bank cannot grant the credit.
Why can borrower insurance cause an application to fail ?
Because the APRC notably includes the cost of borrower insurance when that insurance is required to obtain the credit or to obtain it on the advertised terms. More expensive insurance can therefore push the rate above the cap, even if the nominal loan rate is not particularly high.
Can the bank impose its insurance on me to approve the application ?
No. Service-Public.fr specifies that the bank may require borrowers’ insurance and determine the risks to be covered, but it cannot impose the choice of insurer. You can choose another insurer under the conditions laid down by the bank.
Does the usury rate change every month ?
No, the current principle is quarterly revision. Monthly revision existed from 1 February 2023 until December 2023, on a transitional basis. Since then, the setting has reverted to quarterly.
Sources
- The usury rate, Banque de France
- I want to obtain a mortgage | Service Public, service-public.gouv.fr
Good to know. The content of the articles may contain errors, omissions or information that has become inaccurate since the date of publication, despite the checks carried out. It is provided for purely informational purposes: it does not replace the advice of a notary, solicitor, chartered accountant or property professional, and the firm accepts no liability in the event of incorrect information. For your situation, rely on the official sources cited or contact us.
