What is wear rate and how to calculate it?

PRACTICAL – Different depending on the type of mortgage, the wear rate is set every three months by the Banque de France. Here’s why it’s important to understand and know.

The usury rate is the maximum rate at which credit institutions and finance companies can lend money in France. Established to protect the borrower against predatory loan proposals that could put them in financial danger, the attrition rate affects individuals, associations and local authorities, but not companies. There are different usury rates for consumer loans, revolving loans, authorized overdrafts and housing loans.

How is the attrition rate of a mortgage calculated?

The wear rate on a mortgage, like that on a consumer loan, is calculated in the manner set by law. Indeed, it defines a usurious loan as “any conventional loan granted at a global effective rate that exceeds, at the time of its granting, by more than a third, the average effective rate practiced during the previous quarter by credit institutions…”.

Attrition rates are calculated quarterly by the Banque de France. The latter first obtains the average rates of the various credit categories defined, through a survey of credit institutions in France. The average APR (global effective annual interest rate) thus obtained is then increased by a third to obtain the attrition rates.

What are the current usury rates for mortgage loans?

Published in the Official Gazette in the second fortnight of the last month of each calendar quarter, the attrition rates differ according to the amount lent, the duration of the loan and the type of mortgage in question (fixed-rate loans, etc.). Thus, in the third quarter of 2022, the wear rate of a fixed-rate mortgage (or for works) of more than 75,000 euros and with a duration of less than ten years is 2.60%. The attrition rate of this same type of loan, but contracted for a term greater than or equal to twenty years, is 2.5[…]

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