France’s “ridiculously” low mortgage rates counter weak pound

Photo: Provence, France

France’s record low mortgage rates are countering the weak pound, fuelling property sales.

In November, fixed-rate French mortgages dropped to less than 2 per cent – the first time this has happened in 100 years. As a result, loans are available from as little as 1.70 per cent with 80 per cent LTV on a 20-year term, which agents advise is a way for savvy property hunters to remove the sting of the weak pound by taking a loan at an historically low rate.

Financial experts have crunched some numbers and calculated that the drop in payments on a loan throughout its term (from 2.7 per cent last year to 1.7 per cent now) more than compensates for the drop in sterling value.

“The lower the deposit, the less your exposure to the exchange rate too – why not wait til the rate improves then pay off your loan then?” says Leggeett Immobilier.

Trevor Leggett, Chairman of the estate agenct, adds: “With the pound bouncing up and down like a yo-yo, a huge number of our clients are now taking advantage of the ridiculously low borrowing rate. If you are looking for an investment then property in Paris, the Alps or PACA can easily provide a 3-4 % yield, with 7-8 % yield available in some provincial towns. We’re seeing an unprecedented opportunity – even clients looking for a holiday home are piling in. Prices hit rock bottom 12 months ago and are only going one way for the foreseeable future.”

Indeed, prices are selling for 1.7 per cent more in Q3 2016 than in Q2 2016, following a 0.6 per cent rise in the previous quarter. Notaries, meanwhile, recorded 838,000 transactions in the year to September 2016, up from 755,000 a year before.


Mortgage rates hit historic lows, as Euribor stays negative

10th May 2016

Mortgage rates have hit historic lows in the Eurozone, as the Euribor stays negative.

The Euribor, the rate used to calculate mortgage repayments on the continent, has been low for many months, making property in destinations such as France and Spain arguably more affordable than it ever has been. The European Central Bank’s decision to cut their base rate to 0 per cent in March 2016, though, pushed the Euribor even lower into unprecedented negative territory.

The three-month Euribor dropped below -0.24 per cent in April 2016 for the first time in over half a century, while the 12-month Euribor rose slightly (from -0.013 to -0.01) but remains in firmly negative territory. Indeed, compared to April 2015, when the rate was 0.18, the 12-month Euribor is now down 105.6 per cent.

What does that mean for buyers of property overseas?

Mortgage rates and products vary between countries, but the Euribor’s fall is broadly positive news for those hoping to save a penny or two. Spanish Property Insight notes that existing borrowers with an annually resetting mortgage should see their payments fall around €10 per month (for a typical €120,000 loan over 20 years).

In France, where banks add a margin on top of the three-month Euribor to determine their mortgage rates, that margin is currently around 2 per cent. This means rates are at all-time lows, falling to levels not seen since before World War II.

Non-residents with good profiles can now obtain a 20-year fixed rate mortgage as low as 2.25 per cent – more than one-third below the 20-year fixed rate of 3.7 per cent in 2014.

“In money terms, the total interest payable on a loan of €300,000 over 20 years has dropped from €117,571 to €72,822 a saving of €44,749, or €3,729 a year,” explains French Property Finance.

For buyers with “very good profiles” in Alps resorts or Paris, 20-year fixed rates can even been negotiated below 2 per cent.

The last time that rates were even near these levels was early 2015, when they fell to 2.55 per cent for 20-year fixed products. When rates began to rise later in the year, international and local buyers flocked to secure the best rate possible and not miss out on the bargains available.

“There has never been so much long term value in the French market which is why high-end buyers are returning in force,” comments John Luke Busby, Private Clients Director at French Private Finance.

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