French banks must respect mortgage lending standards: watchdog

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© Reuters. French banks must respect mortgage lending standards: watchdog© Reuters. French banks must respect mortgage lending standards: watchdog

PARIS (Reuters) – France’s financial stability watchdog urged banks on Thursday to respect mortgage lending guidelines and said it could require lenders to set aside more capital if standards were not applied.

As interest rates have fallen to record lows, many French households have binged on cheap credit to buy a home or refinance previous loans, driving up house prices and debt burdens to record levels.

Mortgage lending has grown at nearly 7% in a year, higher than almost any other euro zone country, according to data from the European Central Bank and the Bank of France.

The High Council for Financial Stability (HCFS) urged banks not to allow borrowers to take on debt that represented more than 33% of their revenue and to give out fixed-rate mortgage loans with a duration of no more than 25 years.

It said it could demand banks set aside more capital on new loans that failed to comply with the guidelines.

The council said in October that some French banks were loosening lending standards to win market share in the competitive mortgage market.

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