EconomyAPR, TAEA, usury rate ... What are we talking...

APR, TAEA, usury rate … What are we talking about in terms of mortgage?

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IStock / City Presse

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Between the drop in similar Treasury bond rates – a benchmark for setting mortgage rates – and the banks’ desire to boost their figures, homeowners benefit from particularly advantageous borrowing rates.

But before jumping at the chance, it is still necessary to know exactly what is behind these figures.

The APR as a reference

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First of all, make yourself a reason: you will actually pay more than the indicated rates. Remember that all the monthly barometers that show the evolution of fixed borrowing rates never include ancillary costs. While these studies provide a comprehensive overview of the market and its opportunities, they should therefore be taken with a grain of salt.

When you canvass with banks, it is the annual percentage rate of charge (APR) that must be scrutinized. Mandatory in offers and credit agreements, this indicator takes into account all the costs of the loan: interest, administrative fees, guarantees, intermediation and compulsory insurance (risks related to death, disability, incapacity for work…). It is therefore a reference tool for comparing proposals.

Insurance at the best price

Less known, the annual insurance equivalent rate (TAEA) is also useful at the time of the choice, since it allows to know the real cost of the insurance expressed in rate and therefore to determine its importance in the various costs of the credit. It is estimated that the insurance of a mortgage represents on average 30% of its total cost.

Under these conditions, a few tenths of points more or less can represent thousands of euros over the entire term of the loan. So use this data to play the competition.

Beware of the wear rate

To attract customers, banks generally engage in a price war. But we can always have unpleasant surprises. In order to protect borrowers from excessive rates which could put them in difficulty, the State therefore requires professionals not to exceed what is called the usury rate. The latter corresponds to the annual percentage rate for the previous quarter increased by one third. It is therefore updated every three months and published in Official newspaper.

Far from being limited to the real estate sector, the legislator provides for a usury rate for each type of loan (fixed or variable rate, consumer, bridging loan, overdraft, etc.). The Banque de France lists all these thresholds on its website.

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