The French Association of Bank Users (AFUB) is campaigning for the State to tackle the painful subjects of bridging loans as part of the bill reforming consumer loans.
The bridge loan is a very practical system which allows an individual to be able to finance the purchase of a home before selling his previous property. According to the formulas, the money advanced can be repaid in advance and without penalties by the repayment of the price of the sale of the old accommodation.
Meeting specific temporary financing needs
Limited to two years, the bridging loan is a credit instrument meeting specific temporary financing needs. In exchange for this facility, the rate of bridging loans is often much higher than that of a conventional mortgage. If the old property sells within a reasonable time (less than 2 years), the final invoice is acceptable to the individual.
When the good on the other hand has difficulty in selling like currently where the market of the real estate is in half mast, the weight of the double monthly payments (new housing and old) quickly becomes very difficult to manage. Faced with the repayment difficulties experienced by the owners, the State asked the banking establishments “to treat the bridging loans carefully and not to take advantage of the rescheduling to increase the interest” as the Minister of the Economy still reminded , Christine Lagarde lately.
Rescheduling to increase the interest
This precaution taken with subscribers of bridging loans has, in the opinion of the French Association of Bank Users (AFUB), been insufficient. In fact, in an interview given to the Expansion, the president of AFUB Serge Maître expressed his concern. “Out of 100,000 bridging loans in France, around a third is in bad repayment. These credits represent an outstanding amount of around 5 billion USD. The solutions recommended by the AFUB go far beyond the few avenues launched by the government since the association calls in particular for a moratorium of at least two years for borrowers in order to take into account the development of the real estate and economic crisis . The association also believes that the state could stand surety to avoid sinking bank accounts.