Do you have an interest in challenging your mortgage rate?

Do you have an interest in challenging your mortgage rate?

Getting zero interest on a mortgage is an attractive prospect. A loan of €200,000 obtained over 20 years at 1% entails, for example, interest over €20,000. On this note, a couple attacked Crédit Foncier in 2017, believing the rate at which he benefited was overstated. He demanded that the interest on the loan be cancelled, and that gain be deducted from the remaining capital to be repaid. The Court of Appeal in Toulouse ruled against them on March 24, 2021.

Borrowers assert that the annual rate mentioned in the loan offer resulted from an approximation capable of causing a significant change in the amount of interest paid. However, according to Credit Foncier, this annual rate is obtained by multiplying the exact total effective rate (TEG) by 12. So a monthly TEG of 0.08546164981% turns into an annual rate of 1.0255397977%. Only then did the bank round it up to 1.03%. So the sum is proportional, and the approximation is 0.005%.

The error must be at least one decimal place

A rough judgment not significant enough to justify the invalidity of the interest, on appeal to the Grand Court of Appeal of Toulouse. The judges notably relied on Section R. 313-1 of the Consumer Code to justify their decisions, Paragraph 2 which states that for an error, a bank must make an approximation greater than one decimal. This is not the case now.

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And even if the approximation is higher than this floor, the plaintiffs will be fired. Until 2019, various courts based on a decision of the Court of Cassation. The latter noted that the rate error should result in the substitution of the statutory interest rate (which is set by law, which is too low) for the contractual rate of interest (the rate set by the bank). The resulting savings can amount to several tens of thousands of euros for more token customer profiles.

A new system is more beneficial for banks

But things have changed a lot. “Since Ordinance No. 2019-740 entered into force on July 17, 2019, case law has limited the applicable sanctions regime,” the Baillargues Notary Office explains. Exit from the priority of the legal interest rate, and make way for “forfeiture of the right to interest”, which is a more advantageous system for banks. “It is a very complicated expression to say that the evaluation is up to the judges, explains a lawyer specializing in real estate law. For 3 years, justice has been pro-bank, under the combined influence of several disputes and a very strong lobby of financial institutions.

The potential winnings for plaintiffs, if they sue within 5 years of signing the loan, are starved. “Everything has been done to discourage litigation and clients are no longer covering their costs,” this attorney continues bitterly. The era of ultra-low mortgage rates comes to complete the desires of individuals. With a home loan rate of 1.12% in November 2021, according to the Bank of France, it is difficult to convince one that the process is worth it …

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