Everything you need to know about the wear rate on 1 January 2023

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Press release from the Banque de France.

Paris, January 20, 2023
The Banque de France is proposing, for a limited period of time, a monthly adjustment of usury rates beginning on 1 Februaryr.
According to the law, usury rates are calculated based on data collected on credit rates during the previous quarter, such as 4/3 of the average rates applied. These provisions protect borrowers from excessive rates and thus maintain broad access to credit.
Over the past 12 months, usury rates have been raised in the wake of the rise in loan rates charged by credit institutions. The application of the wear rate formula has led to well-proportionate increases. The production of new real estate loans over the whole of 2022 is thus estimated at 218 billion euros and remains higher than in all previous years, except for the historic exception of 2021. In recent months, banks have continued to serve borrowers of all age and income groups and for all acquisition reasons, confirming the absence of a market freeze. In the general trend of rising rates in Europe, real estate credit is in France the most abundant, the cheapest and the safest of the major European countries.
However, especially in the last months of the year, the Banque de France was able to observe variations in the distribution of credit distribution, with a threshold effect within each quarter. Some cases, pending the next significant quarterly increase in the rate of wear and tear, are thus postponed to the beginning of the following quarter.
Also, exceptionally during the period of the strongest rise in rates, the Banque de France is proposing a technical adjustment to better “smooth out” increases in the rate of usury. The publication will be made monthly and no longer quarterly for the wear rates for all categories, starting on February 1, for the rates applicable from February 1 to July 1. The rates of wear and tear will remain established on the basis of the average of the rates applied during the previous three months.
This proposal, in agreement with the Minister of Economy and Finance, was the subject of a consultation of the French banking federation, the association of financial companies and authorized associations of brokers. It was also presented to the Financial Sector Advisory Council. It fully respects the protective spirit of the law, while allowing for a finer adjustment of usury rates in the coming months.
About the Bank of France. An independent institution, the Banque de France has three main missions: monetary strategy, financial stability, and services to the economy and society. It contributes to defining the monetary policy of the eurozone and implements it in France; it controls banks and insurance companies and ensures the control of risks; it offers numerous services to businesses and individuals.

The duration of use of a product, service, or application is called the duration of wear and tear. It is often measured in days or weeks. If you are wondering what the wear rate really is and how to reveal how long your business has been wearing out, this article is for you.

1. Calculate the usury rate of a loan

The usury rate on a loan is calculated by dividing the total interest amount by the amount of capital borrowed. It is an indicator of the cost of using capital, and it is used to validate the financial balance of a project. It also makes it possible to assess the ability to repay the loan.

Reminder of the wear rate standard

To calculate the usury rate on a loan, you must multiply the interest rate by the amount of these same interests. It is the sum thus obtained that represents the wear rate.

If you have a fixed interest rate, simply multiply the interest rate by the capital you have borrowed. On the other hand, if you have a variable interest rate, you will have to multiply it by the sum of these interests.

Calculate the loan usury rate

To determine this rate, you must first calculate the debt ratio of the loan. To do this, you need to divide the total loan amount by the total amount you are repaying. This calculation allows you to determine if you are repaying more or less than the total amount of your loan. You must then divide it by the total amount you have to repay. This gives you your debt ratio.

The formula for calculating the wear rate

When you want to calculate your rate, you must first determine your principal and loan term. This can be variable. To perform the calculation, you also need to know the amount of your monthly payments. This is the amount you pay each month to repay your loan. You must then divide the amount of your monthly payments by the amount of your capital. It is the result obtained that will allow you to calculate it,

2. Definition and examples

The wear rate, also called the return rate, refers to the proportion of products sold that customers return to their supplier. In other words, it is the proportion of products sold that were actually used. Knowing the wear rate is very important for businesses that sell consumable products, such as household appliances, sporting goods, or drinks. It is therefore an indicator of service quality. The definition of the wear rate is therefore:

Calculate the wear and tear rate of a real estate investment

To calculate it, you must first calculate the aesthetic interest rate. To do this, you need to divide the interest rate by the investment price.

You then need to add that result to 1.6. The result of this addition is the wear rate.

Definition

The usury rate corresponds to the part of your capital that is lost each year. This means that, if you have a 5% usury rate, you will lose 5% of your capital each year. This rate may be different depending on your type of investment. If you invest in the stock market, you will lose a bit more of your capital than if you invest in the real estate market.

Determining the wear and tear rate of a property

To determine the wear and tear rate of a property, several parameters must be taken into account, such as the loan rate, the amount outstanding and the value of the property. In addition, the wear rate may also vary depending on the type of property. You can thus calculate your wear rate based on the number of months of repayment remaining. ,

3. Is wear and tear prohibited?

The advice of Prud'hommes de Paris has just issued a judgment prohibiting a company from dismissing its employees because of their age. The decision follows the complaint of an employee of a cleaning company who requested the maintenance of the principle of “economic dismissal prohibited for those over 50”. Read the decision here.

The maximum wear rate is 3%

To calculate it, you need to take into account the inflation rate and the term of the loan. In fact, it should not exceed 3% of these two variables.

It can therefore be useful to calculate the inflation rate and the maximum wear rate. This will let you know if you can borrow that amount.

The wear rate must not be higher than the legal rate

The wear and tear must not exceed the legal rate. It should not be too important either. You should also consider that your wear rate must be lower than the take-back rate of your property. To calculate it, you must first determine your recovery rate. This is the take-back price of your property. You then have to divide it by the purchase price. Finally, you must add 5% to this result to get the wear rate.

The legal rate of usury varies according to the duration of the credit

However, usury should be considered depending on the duration of the credit. The maximum wear rate is set at 20%. This means that a person can make a loan of 60,000 euros at 20%, but not at 40%. Above 20%, the wear rate is similar to mechanical wear, which is similar to usurpation. If you think your usury rate exceeds 20%, you can therefore check with your bank. ,

4. The rate of wear and the law

The law is made to protect consumers and renters. If you own a condo or a house, you must respect what the law calls the “wear and tear rate.” This is a complicated term to describe a simple situation. This is the period of time that elapses between the start of your lease and the moment when you can do major renovations to your condo or house. There are also legislative changes under consideration, n

The wear rate is calculated over three years

To determine it, you need to calculate it over three years. This allows you to benefit from a certain guarantee. This is especially the case if you want to buy another property in the years to come.

It also allows you to benefit from greater security. This way you can ensure that the loan remains repayable until the end.

The law regulates usury rates

When using the wear rate, you must ensure that you comply with the law regarding the calculation of the rate of wear and tear. It is for this reason that you need to take into account a number of criteria. First, you need to consider the total loan amount. This is also why you must declare all the amounts you owe to a bank. Next, you need to consider the maturity of the loan and the interest rate.

Usury is between the legal rate and the real rate

This is a rate that may be higher than the legal rate. This may be the case, for example, if you have a housing construction project. In this case, you should benefit from an interest rate of 3.5%. This allows you to have a higher wear rate. This is the case, for example, if you decide to take out a home loan. ,

5. The rate of wear and the law: the exceptions

Contracts are legal instruments that allow two or more parties to end a dispute or to establish their rights and obligations. Contracts are therefore also very useful in allowing the parties to resolve their disputes. But they can also be faulty. Indeed, some contracts are not valid. Contracts may be in default for a variety of reasons, including invalidity, non-performance, or abuse of rights. For example, a contract concluded with a

Calculate the wear rate

To calculate it, you also need to take interest into account. Indeed, you must subtract these interests from your capital.

This will allow you to determine the amount of your capital at the end of the year. In this way, you cannot exceed the wear rate. This allows you to ensure that you do not exceed this limit and that you cannot end up with a capital that is greater than that of your loan.

Exceptions

It can also be modified in the event of the acquisition of a second home. In this case, it is possible to consider that it is a first residence. This practice is legal, but it is important to justify it. To do this, you can for example specify that you want to keep your main residence, but that you also want to own another residence in order to rent part of it.

The duration of the loan

Establishing it is often difficult, especially when you want to do a simulation. That's why you need to make sure you know the length of your loan. However, even if you know exactly how long you need to repay your credit, you should always check that it is at least five years.

Conclusion

The usury rate is a concept that oscillates between two points of view: the legal one and the economic one. Thus, in legal matters, it is a question of applying an interest rate that is higher than the average of the rates charged on the market. In economic matters, it is an interest rate that is higher than what is considered acceptable.

What is the wear rate on January 1, 2023?

Like every start of the year, the Official Journal publishes the new wear rates, the figures of which will be in force for the next three months. It is the Banque de France that takes care of the quarterly calculation of this usury rate. The numbers show an increase for the first quarter of 2023, as it rises to 3.53% for fixed-rate loans of 10 to 20 years.

Rate of wear and tear increased on 1 January 2023

Real estate loans and loans for works worth more than €75,000 have been subject to new usury rates since January 1. Calculated from TAEG that banks practiced in the previous three months and increased by a third, they increased again.

Compared to the wear rates applicable during the 4th quarter of 2022, an increase of 0.36 to 0.52 points was recorded for the first quarter of 2023. Below is a comparative table of this increase.

Real estate loans and loans for works Usury rate applied in the 4th quarter of 2022 Usury rate applied in the 1st quarter of 2023 Fixed-rate loans of less than 10 years 3.03% 3.53% 3.53% Fixed-rate loan with a term of 20 years and more 3.05% 3.57% Variable-rate loans 2.92% 3.35% Bridge loans 3.40% 3.76%

For consumer loans and work loans whose amount is less than or equal to €75,000, the usury rates applied in the first quarter of 2023 are as follows:

• 21.04% for a loan less than or equal to €3000 against 15.78% for the 4th quarter of 2022
• 10.55% for a loan of more than €3000 and less than or equal to €6000. It was 7.91% for the 4th quarter of 2022
• 5.79% for a loan over €6,000 compared to 4.34% during the 4th quarter of 2022

Usury rate for loans to individuals and loans to professionals

For all natural persons who act for their professional needs, the wear and tear rate applied since January 1, 2023 is 16.47%. It was 12.35 for the 4th quarter of 2022.

For individuals, i.e. those who do not have an industrial, commercial, craft, craft, agricultural or non-commercial professional activity, the table below better summarizes the usury rate applied for this first quarter.

Loans to legal entities, without commercial purposes Usury rate applied during the 4th quarter of 2022 Usury rate applied for the 1st quarter of 2023 Fixed-rate loans with a term of 2 to 10 years maximum 3.19% 4.25% Fixed rate loans with a term of 10 to 20 years maximum 3.18% to 20 years maximum 3.18% 4.24% Fixed rate loans with a term of 20 years and more 3.23% 4.31% Variable rate loans with an initial term of more than 2 years 3.36% 4.48% into account 12.35% 16.47% Other loans with an initial term of less than or equal to 2 years 3.08% 4.11%