The real estate market is suffering between the violent rise in interest rates and usurious rates that are unsuitable for this sudden movement. However, there is one area that withstands this complicated context well and is even gaining momentum thanks to the Lemoine Act taking effect in mid-2022: the delegation of borrower insurance.
The Lemoine Law, or the revolution in mortgage insurance
The regulations regardingborrower’s insurance has developed significantly since its entry into force Lagarde’s law of September 2010. Opposite quasi-monopoly of banks on this essential product to achieve its property loanintroduced legislature right to free choice of insurance contractwhich validates the principle of delegation: the candidate for the loan can take out the insurance he chooses and decline the group contract proposed by his bank, subject to a equivalence of guarantees between the two offers.
Not very restrictive for the banks, the law has not broken theirs dominant position : more than a decade later, they still hold 87% market sharean aberration when the insurance marketed by outside insurers is between two and four times cheaper. Despite two successive measures (the 2014 Hamon Law and Change of Bourquin borrower insurance of 2018), which approved the modification of the insurance under the loan on the due date, borrowers could not fully exercise their right to freely choose the insurance contract.
If it remains complicated to implement in the first subscription, home loan insurance delegation has recently become easier thanks to Lemoine’s law. Agreed on in February 2022 and implemented from 1eh June 2022, authorizes this final regulation change borrower’s insurance at any time and free of charge starting the day after signing the loan offer. Mortgage insurance thus becomes the only insurance that can be canceled at any timewithout the insured having to respect a minimum subscription obligation, as in Home insurancecar insurance and mutual health.
That Lemoine’s law amplifier as well bank bonds :
- Any request for delegation of borrower’s insurance must be answered within 10 business days.
- Any refusal must be fully justified in writing on a single document.
- Every year, the bank must inform the borrower of his right to change insurance on any durable medium.
Savings in lender insurance with the Lemoine Act
Since 1eh September 2022, any borrower, regardless of the anteriority of the mortgage, can cancel the current insurance and replace with a cheaper offer with at least equivalent guarantees. Borrowing households seem to have understoodfinancial share of the Lemoine Act.
At the broker Magnolia.fr, the insurance change requests jumped 200% from September, allowing customers to make hundreds or even thousands of euros in savings over the remaining term of their loan. For a loan of €250,000 over 25 years, the gain is around €15,000 by switching from bank insurance to delegated individual insurance within three years of signing the loan offer.
Faced with a property market punished by interest rate increase and problem with wear rates, requests for delegation of borrower insurance on new loans are mechanically less frequent. By mortgage insurance brokers, termination under the Lemoine Act now represents 80% of the delegation compared to 60% in 2021, a sign of the enthusiasm for this system. At the time when purchasing power of households is squeezed from all sides, the Lemoine’s law allows you to save money instantly, by reduction of the insurance premiumand by extension the total costs of a mortgage loan.
Example 1
Jean and Marie, a non-smoking 30-year-old couple, borrowed €250,000 over 20 years in October 2021 at a loan rate of 1.10%, with insurance of bank interest of 0.34% on each principal. Their insurance costs them €142 a month (2 x €71), or a total of €34,000 over 20 years.
In November 2022, our couple began the process of switching insurance by competing quotes thanks to a mortgage insurance comparison. The best insurance proposal shows a rate of 0.10% with corresponding guarantees. The monthly premium drops to €40 per head, for an insurance cost of €9,037 over the remaining term. Savings: €23,259!
Example 2
In October 2019, Paul, 45, a smoker, borrows the sum of €350,000 over 25 years at a loan rate of 1.05%, covered by a bancassurance with a rate of 0.54%. He pays €158 a month for insurance, for a total cost of €47,250.
By switching insurance 3 years later, he obtains a 0.25% rate, i.e. a monthly contribution of €66 and a cost over the remaining period of €17,531. He save €24,031!
Make some mortgage insurance simulations online for get the best contract in 2022.
That Lemoine’s law contains two other measures that promote the inclusion of borrowers with health problems:
- that termination of medical choice for loans of less than €200,000 (€ 400,000 if two borrowers with 50% insurance quota on each head), reimbursed before the 60th the insured’s birthday;I
- ‘extension of the right to be forgotten which goes from 10 to 5 years for former patients with cancer or hepatitis C.
That sick or previously sick borrowers who have bought insurance at a high cost due to their health history now have a huge opportunity to significantly reduce the cost of their insurance thanks to Lemoine’s Law.
