France

Country Profile

Source: Jacques Demarthon / AFP / Getty Images, Paris 2010

In 2008, France’s home ownership rate stood at 47.2 percent of urban households, of which 33 percent had a mortgage.  The home ownership rate was 56.7 percent nationwide. The home ownership rate is lower than most other developed nations, partly due to France’s strong public  and social rental sector, which housed 22 percent of urban households in 2008.

France’s residential debt to GDP ratio was 41 percent in 2008. The French mortgage market is mainly driven by commercial banks that together originate approximately 80 percent of all mortgage loans. Most loans are originated at a fixed rate for a 16- to 25-year term. The government supports several subsidies that are administered by an organization called FGAS (Fonds de garantie de l’accession sociale), whose basic mission is to guarantee mortgages to lower-income households. FGAS was created in 1992 as a privately held company that has credit institutions (including high-street banks and mutual banks) as its shareholders. The French government owns none of its capital, but can veto any of the organization’s financial decisions. The different programs administered by FGAS include:

- The PAS “Social Access Mortgage” guarantee:
Operational since 1993, PAS is a mortgage scheme reserved for households with modest incomes that are sufficiently solvent to buy a property. PAS mortgage holders are required to adhere to familial and regional scales of maximum income, and benefit from a maximum rate of interest that is close to the market rate[1] and lower origination costs. All PAS mortgages must be covered by a FGAS guarantee, which is a self-insurance by participating banks. If the mortgagor defaults, FGAS will pay the respective credit institution the necessary sum to cover the default.

For any PAS guaranteed mortgages originated between 1998 and 2003, the mortgagors benefit from a security package that lowers their monthly payments by 50 percent if either borrower becomes unemployed, for a maximum period of 12 months. This difference is to be repaid without any penalties or interest once the main mortgage is paid off. FGAS is responsible for paying the banks the necessary sums to cover the interest costs for the postponed installments.

- 0 percent mortgages: Since 1995, certain qualifying lower-income mortgagors can borrow at a zero interest rate for new houses or substantial renovations of an existing house. The FGAS guarantee is extended to mortgagors under this scheme who comply with the PAS income limits. Since 2005, credit institutions receive a tax credit in lieu of the interest income for such mortgages, whereas previously they received a cash subsidy. Also, since 2005, 0 percent mortgages are available for both new and existing housing, whether or not any improvements/repairs have to be done. FGAS administers the 0 percent mortgage.

- 0 percent Eco-mortgages:
Since 2009, the government provides an interest-free loan of up to €30,000 for energy efficiency improvements to pre-1990 properties. The loan is available for both owner-occupied and rental properties. FGAS has an automated information exchange with the credit institutions, and is able to manage all its operations with a permanent staff of 30 people, despite a growing volume of mortgages. FGAS also provides technical assistance to local authorities wishing to participate in home ownership schemes.

Also of note is France’s 1 percent compulsory housing contribution, which is payable by every private employer with more than 20 employees.The government set up a liquidity facility during the credit crisis called SFEF (Societe de Financement de l’Economie Francaise). SFEF is a private company of which 34 percent is owned by the state; the remaining 66 percent is underwritten by the seven largest banks, namely Banques Populaires, BNP Paribas, Caisses d’Epargne, Credit Agricole, Credit Mutuel, HSBC France and Societe Generale. France is unusual in that it does not have credit bureaus (based on the protection of people’s privacy). However, there are very few defaults, as evidenced by a 0.91 percent level of doubtful loans (loans that are more than six months overdue) in 2008. France has not pursued the development of an RMBS market.


[1] The nominal interest rate of a PAS must be equal to that of officially approved mortgages less 0.6 of a point. This maximum rate is indexed on the TME (average monthly rate of State mortgages for a duration equal to or exceeding seven years).

About the Editor

Claude Taffin
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Claude Taffin is a housing finance specialist that has previously served as a Director at Credit Foncier de France, Director at Social Union of the Habitat, and as a Senior Specialist at the World Bank.