Bad news for future borrowers. While the lights are green for home loans, with extremely low interest rates and relaxed conditions of access to credit, the State wishes to increase the taxation on credit insurance.
While market conditions blithely facilitate the use of mortgage loans for individuals, the State has borrower insurance in its sights. Indeed, currently in preparation for the formation of the 2019 budget, the government plans to extend the taxation currently applied to this insurance. A decision that would have repercussions on contribution rates from next year for future borrowers.
9% tax on all new contracts
This insurance covers the possible death of the borrower, disability or incapacity during the repayment phase of the credit. In addition, there are additional guarantees which are optional. These cover events such as job loss. Currently, there is a more aggressive tax of 9% on premiums paid including guarantees of job loss, incapacity for work as well as disability.
However, the Ministry of the Economy wishes to extend taxation to all new borrower insurance. For the time being, it is still difficult to decide with certainty whether retroactivity on the old contracts will be applied.
Insurance premiums should be more expensive
Now, the removal of the exemption on basic guarantees from new contracts will lead insurers to restructure their offers. If it is possible that they include a relative increase in taxation within their margin, borrowers risk being impacted on the price of their contribution. The incorporation of the 9% would require possibly too much effort. Indeed, since the implementation of the insurance delegation and the Bourquin amendment more recently, the rampant competitive intensity has broken market prices. Insurers will therefore not be able to fully pass on the tax hike to already very competitive insurance premiums.
A tax to compensate for the losses of Action Logement
With this increase in tax revenue generated by borrower insurance, the State hopes to transfer several hundred million dollars to Action Logement. The objective is to finance the state agency for social housing, which is losing 300 million dollars a year, following the reforms enshrined in the Pacte law.