One of the articles of the Consumer Law of March 17, 2014, called “Loi Hamon” (1), deals with borrower insurance under the mortgage loan.
It states that, as of July 26, 2014 (loan offers issued after this date), any borrower may replace its loan insurance contract with an equivalent contract for a period of one year from the date of implementation. said loan.
A supplement to the Lagarde Act and the Murcef Act on the mortgage loan
This is not the first time that the legislator has tried to impose competition in terms of insurance under the mortgage.
The Murcef Law of December 11, 2001 prohibits banks from offering bundled offers “mortgage + insurance” , supplemented by the Lagarde Law of September 1, 2010 which requires banks to accept external loan insurance contracts when those These are perfectly equivalent to the banks’ insurance policies in terms of coverage.
In practice, not all banks necessarily played the game, and it is indeed very difficult to control the application of such laws in all the elements of assessment of a financing file.
The mortgage for banks: a product of appeal, at a loss … or almost
At present, home loans represent a considerable product of appeal for deposit banks, in order to conquer new market shares.
The counterpart of a domiciliation of income in exchange for a mortgage is thus almost systematic, and the proposed conditions are directly related to the profile and potential of the future customer (young people, changing profiles, high income levels, etc.).
Most banks are therefore likely to make considerable discounts on their public rates for a profile that interests them , and even go down to levels considered as “margin 0”, relying on the profitability of several years of future commercial relationship. . We then speak of the GNP (Net Banking Product) of the operation.
In the calculation of GNP, which obviously varies according to the banks and the commercial policies that they have defined for a given period, the bank thus integrates the direct profitability of the loan (rate applied / rate considered as margin 0), but also the profitability of the insurance and possibly the commission paid by the surety body. Group insurance thus represents (represented?) A large part of GNP , since bank insurance contracts are also much more expensive and less flexible than external insurance contracts.
Impacts on the overall cost of a home loan: a probable decrease in the very short term
In the very short term, it is therefore likely that the systematic introduction of insurance delegations (at the time of loan negotiation or in the months that follow) will lead to a decrease in the overall cost of credit.
However, and especially for some banks, since group insurance accounted for a large part of the GNP realized on lending transactions, it is likely that the flexibility on rates will be less , see that the loan rates increase slightly to compensate for this. .
This possible “boomerang effect” is fortunately largely offset by very low interest rates, and strong competition in the mortgage market in a context of reduced transactions. The impact is thus materialized mainly by a fall in the profitability of banks on mortgage loans, already low …
Conclusion: a measure in favor of the consumer
To summarize, this Hamon Law effectively enforces the Lagarde and Murcef laws on insurance related to real estate loans because it comes after negotiations with banks.
It is beneficial for the consumer because it finally helps to remove the barriers to healthy competition on loan insurance, which have often been paid too expensive.
However, be aware of the intrinsic conditions of the chosen insurance (guarantees, exclusions, deficiencies) because they can sometimes contain dangerous gaps.