The Two Ceilings on a Mortgage: France's Usury Rate and Portugal's Debt-Service Limit

Two machines, and the percentages are not comparable

It is tempting to read «35 % in France, 45 % in Portugal» as evidence that Portugal lends more freely. That reading survives about thirty seconds of contact with either rulebook. The two ratios are computed on different numerators, different denominators and different assumptions, and each country pairs its ratio with a second constraint the other does not have.

France pairs its debt-service ratio with a hard legal ceiling on the total cost of the credit, so a French file can be refused even when the borrower's income is ample, purely because the arithmetic of the annual percentage rate breaks a published threshold. Portugal has no usury ceiling of that kind but stress-tests the payment before applying its ratio, and reduces the assumed income of a borrower who will be over seventy when the loan ends. In other words France constrains the price and Portugal constrains the assumptions, and the same household can pass in one country and fail in the other for reasons that have nothing to do with how much it earns.

France: the usury rate caps everything, not just the interest

The mechanism is arithmetic and entirely public. Each quarter the Banque de France measures the average effective rate that credit institutions actually charged in the previous quarter, category by category, and multiplies it by four thirds. That is the ceiling for the quarter that follows. For the quarter beginning 1 July 2026, the averages measured over the second quarter of 2026 were 3.05 % for fixed-rate loans under ten years, 3.43 % from ten to under twenty, 3.97 % at twenty years and over, 3.96 % at variable rates and 4.79 % for bridging loans; multiply each by four thirds and you get the thresholds of 4.07 %, 4.57 %, 5.29 %, 5.28 % and 6.39 %.

Those figures moved. On 1 April 2026 the threshold for fixed-rate loans of twenty years and over stood at 5.19 %, against an average of 3.89 %; three months later it was 5.29 % against 3.97 %. That is the design working as intended — the ceiling tracks the market with a one-quarter lag — but the lag is also the mechanism's weakness. When market rates rise quickly, the ceiling computed from last quarter's averages is too low for this quarter's offers, and borrowers whose costs are highest are the ones squeezed out first.

The reason it bites unevenly is in the definition of the rate. Article R. 314-4 of the consumer code includes in the annual percentage rate, when they are necessary to obtain the credit or to obtain it on the terms advertised, the arrangement fee, any intermediary's fee, the cost of compulsory insurance and guarantees, account-keeping and payment charges, and the cost of valuing the property. Loan insurance is priced on age and health. A borrower in their sixties, or one with a medical history, can be offered exactly the same interest rate as everybody else and still break the ceiling on the insurance alone — which is why the practical response is to shop the insurance rather than the rate.

France: the 35 % rule, and the flexibility that makes it workable

The second French constraint comes from the Haut Conseil de stabilité financière, whose decision of 29 September 2021 became binding on lenders and sets two limits: the borrower's debt-service ratio must not exceed 35 % of income, and the loan's maturity must not exceed 25 years, with a tolerance of two additional years of deferred amortisation where entry into possession is delayed relative to the loan — the case of a property bought off plan. The insurance premium counts inside the 35 %, which is the same reason it counts inside the usury calculation.

A rule that admitted no exceptions would freeze out every atypical borrower, so the decision comes with a margin: up to 20 % of each lender's quarterly production may fall outside the criteria. The decision of 29 June 2023, in force from 1 July 2023, set how that margin must be used — at least 70 % of it reserved for buyers of a main residence and at least 30 % for first-time buyers, which leaves the remaining slice genuinely free. A further decision of 18 December 2023, applying from 1 January 2024, refined the machinery, notably by taking bridging loans with a loan-to-value ratio of 80 % or less out of the debt-service computation.

Portugal: the ceiling moved on 1 August 2026, and it moved down

Banco de Portugal replaced its 2018 recommendation with Recomendação Macroprudencial n.º 1/2026, applying to contracts whose solvency assessment takes place from 1 August 2026; the 2018 text governs anything assessed up to 31 July 2026. The headline change is article 6: institutions are recommended not to grant credit resulting in a debt-service-to-income ratio above 45 %, where the previous figure was 50 %. The preamble gives the reason in plain terms — accelerating house prices, accelerating household credit, a rising average loan size, strong competition and more young first-time buyers on lower incomes.

The exception band tightened alongside it. Under the new text up to 10 % of the total amount of credit granted in each half-year may exceed the 45 % limit, against 15 % before, and the institution must justify what additional elements it took into account. The other limits are unchanged in substance: loan-to-value must not exceed 90 % for the acquisition, construction or renovation of an own permanent home and 80 % for any other purpose, and maturity must not exceed 40 years for borrowers aged 35 or under and 35 years for those over 35, taking the older borrower's age where there is more than one. The average-maturity recommendation was dropped, the 100 % loan-to-value allowance for properties held by the lending institutions themselves was abolished, and financial leasing of immovable property was taken out of scope altogether.

Two details of the calculation matter more than the headline. The numerator is not the payment you were quoted: article 4 requires the new instalment to be assumed constant and to reflect an increase in the interest rate, on the terms set by Instrução n.º 23/2023 of 9 October, and to be added to the instalments on every other loan the borrower already has with a defined repayment plan. And where the borrower's age at the scheduled end of the contract exceeds seventy, the income used in the denominator must be reduced by at least 20 %, weighted by the ratio between the number of contract years spent above seventy and the total maturity — unless the borrower is already retired at the time of the assessment. A forty-year loan taken at thirty-five is therefore assessed on a materially lower income than the borrower is earning today.

What actually gets a file refused

In France, three things in order of frequency: an annual percentage rate that breaks the quarter's usury threshold because of the insurance, a debt-service ratio above 35 % once every existing credit commitment is added in, and a maturity that cannot be stretched because 25 years is a hard limit rather than a guideline. Lengthening the term is the standard remedy for the second problem and it makes the first one worse, since a longer loan sits in a higher usury category.

In Portugal the binding constraint is more often the stress test than the headline ratio. A payment that comfortably fits 45 % at the quoted rate can fail once the shock required by the supervisory instruction is applied, and a borrower who will be over seventy at the end of the term loses part of the income the calculation is allowed to see. Add the loan-to-value limits and the picture is clear: the deposit and the age at completion do more work in Portugal than the salary does.

One structural difference is worth ending on. The French criteria bind lenders as a supervisory obligation and the usury rate is a prohibition in the consumer code; the Portuguese limits are a recommendation applied on a comply-or-explain basis, which the central bank monitors through institutions' reporting. That does not make the Portuguese limits soft — the reporting is granular and the exception band is small — but it does mean an individual file has somewhere to go in Portugal, through a justified exception, that it does not have in France once a published usury threshold is crossed.

Frequently asked questions

Does the usury rate apply to the interest rate or to the whole cost?

To the whole cost, expressed as an annual percentage rate. The consumer code lists what has to be inside it: arrangement fees, intermediary fees, the cost of compulsory insurance and guarantees, account-keeping charges and the property valuation, excluding the registration duties on the transfer itself. This is why a rejection on usury grounds is almost never solved by asking for a lower interest rate, and very often solved by changing the insurance policy.

Can a Portuguese bank still lend above 45 % after August 2026?

Yes, within a small band. The recommendation allows up to 10 % of the total amount of credit an institution grants in each half-year to exceed the 45 % ratio, and requires the institution to justify what additional risk-mitigating elements it took into account. It is a genuine route for an atypical file, but it is a scarce resource being allocated by the lender, not a right you can claim — and the band was cut from 15 % when the new text came in.

Which loans fall outside the Portuguese recommendation altogether?

Article 1 lists them: overdrafts; credit granted to prevent or cure default, including refinancing, consolidation and the amendment of existing terms; credit of an amount equal to or less than ten times the guaranteed minimum monthly remuneration; contracts under the two 2014 laws on mortgage arrears; overdraft facilities and other credit with no defined repayment schedule, including cards and credit lines; and, new in the 2026 text, financial leasing of immovable property. Leasing of movable property remains inside.

How much borrowing capacity does the Portuguese change actually remove?

On a household net income of 2,500 euros a month the permitted debt service falls from 1,250 euros to 1,125 euros, a difference of 125 euros. At a rate of 3.5 % over a 35-year term, 1,250 euros of monthly payment supports about 302,000 euros of capital and 1,125 euros supports about 272,000 euros, so the change removes roughly 30,000 euros of borrowing. That is an illustration, not a quotation: the actual figure depends on the rate you are offered, the stress applied to it, and every other loan already counted in the numerator.

Do these rules apply to a buyer who lives outside the country?

They attach to the lender, not to the borrower's residence, so a bank established in France applies the French criteria and the usury thresholds to every file it writes, and an institution with its head office or a branch in Portugal applies the Portuguese recommendation. What changes for a non-resident is the evidence: income earned abroad has to be documented to the lender's satisfaction, currency mismatch between income and instalment is treated as a risk factor, and the practical outcome is often a lower loan-to-value than a resident with the same numbers would obtain.