Real estate credit: the domiciliation of revenues in the hot seat

 

The domiciliation of income requested by a lender during a credit negotiation is the subject of criticism. The lack of transparency on the benefits allocated is partly involved.

The domiciliation of income requested by a lender during a credit negotiation is the subject of criticism. The lack of transparency on the benefits allocated is partly involved.

A highly strategic account domiciliation

A highly strategic account domiciliation

The mortgage is a very strategic financing process for banks. In times when interest rates have reached historically low levels, the economic profitability of the product no longer holds. Indeed, the margin on housing loans becomes almost zero. The real appetite of banks to grant them is, therefore, more of a stake in loyalty than profitability.

When acquiring property through the provision of financing, the borrower commits to a path of high responsibility over a long period generally. This allows the bank’s professional to increase the chances that his client will perpetuate the banking relationship. In years when the credit is repaid, it is during this phase that the bank seeks to derive its source of profitability that it could not obtain with the loan signature. As a result, the domiciliation of bank accounts of borrowers is a major criterion in the commercial strategy of the institutions.

The opacity of the advantages granted

The opacity of the advantages granted

Now, bank domiciliation is very often required to homes for mortgage credit is granted. At the moment, the regulations clearly stipulate that the request is inserted in a clause in the loan offer. Since 1 January 2018, a decree mentions that the maximum downtime of a bank account may not exceed 10 years as a result of a bilateral agreement. However, the bank must be able to offer borrowers a personalized benefit. It can be assimilated to a reduced interest rate for example.

But the financial sector has recently made a point of clarifying its fears about the secrecy surrounding these personalized benefits. For this purpose, a report sent to the minister of the economy requires a suspension of the domiciliation clause deemed too compelling for customers. Consumers’ associations are particularly worried by the fact that the law, aimed however to frame the practice, finally leads to generalizing the application for domiciliation with borrowers. A shame at a time when legislation tends to facilitate banking mobility. If rapid action proves difficult to implement, the committee recommends reducing the maximum domiciliation period to 5 years. A reassessment that can become effective within a reasonable time.

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