Low mortgage rates in France continue to bring in British buyers, as banks resist the pressure to hike lending costs.
The summer period is normally the time of year when mortgage rates fluctuate, but brokers this year report that most lenders are resisting the pressure to increase rates. Rates in France have fallen to historic levels in recent years, as the Euribor has remained in negative territory, although it has begun to rise from those all-time lows this year.
Rates remain at attractive levels of around 1.7 per cent for a typical 10-year mortgage. As a result, British buyers continue to flock to France, with favourable financing conditions helping to offset the expense of the pound’s less favourable exchange rate with the euro.
Indeed, French estate agency Leggett Immobilier says that they have continued to see a steady stream of British buyers interested in French real estate, mostly those looking to move to the country permanently.
Trevor Leggett, Chairman of Leggett Immobilier says: “The things that Brits love about France haven’t changed. The weather is still great, the property prices fantastic, the way of life relaxed and the food and wine delicious. It isn’t surprising that some of our clients are dipping a toe into a new lifestyle with a second home purchase, with a view to a more permanent move in the future.”
Nearly half of those polled stated that their reason for buying a second home in France is to spend longer periods of time in the country prior to a permanent move. This was followed by the property being used by family and friends for breaks, then ‘as a getaway’, for family holidays and finally, to rent out.
The results show how focused many British people still are on making a permanent move to France despite a year of uncertainty around the position of the UK within the EU, notes Trevor Leggett.
Earlier this year, figures from the Notaries of France found that more than 900,000 transactions had been registered in the 12 months to May 2017, surpassing the forecast of 880,000.
French property sales reach record highs as mortgage rates hit record lows
25th November 2016
French property sales are soaring to record highs this year, as mortgage rates hit record lows.
The UK’s recent vote to leave the European Union have left some anticipating negative fallout from the ensuing uncertainty. Indeed, the pound has weakened significantly against the euro and dollar, making overseas property and holidays more expensive for Brits. Foreign interest in French property, though, is higher than ever, with agents reporting only a “marginal” Brexit impact upon demand from the UK.
A large part of that has been due to France’s mortgage rates, which are at the lowest levels the country has ever seen.
Fixed rate French mortgages are now available from as little as 1.70 per cent, with 80 per cent loan-to-value on a 20-year term. These rates are available to most non-residents, and more than offset the recent changes in exchange rates. With a purchase price of €200,000 and a deposit of €50,000, for example, the monthly repayment on a mortgage would be just €737.69.
Trevor Leggett, Chairman of Leggett immobilier, says the company has seen record sales in 2016.
“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,” he explains. “If you are looking for an investment then property in Paris, the Alps or PACA can easily provide a 3-4 per cent yield, with 7-8 per cent yield available in some provincial towns.”
Last year, the agency sold 1,200 properties. In 2016, it is on target to sell even more. British buyers are helping to drive up transactions, with the biggest change since the Brexit vote being that the requests are “more serious”, as a growing number of buyers switch from paying cash to taking out loans.
Enquiries are up 20 per cent year-on-year for MGM French Properties, which is also celebrating its best summer in five years. The company reports record sales of Alpine property during August and September, with UK interest snowballing.
Laurent Hallez of MGM French Properties comments: “Over the past few months, we have found savvy British investors eager to buy up French property as they look to take advantage of the historically low interest rates and attractive mortgage packages. We are encouraged by the quality prospects ahead and look forward to a number of new leaseback and outright purchase developments in the Savoie region to be announced over the course of the season.”
Buyers are encouraged by the ongoing investment in lift infrastructure in the lesser-known resorts, adds Hallez, which opens up ski areas and gives owners easy back-door entry to some of the world’s top resorts for a fraction of the price.
One unsung hero highlighted by Hallez is Samoëns, which he describes as “on the brink of exciting change”. This season, France’s largest Alpine developer launched Résidence Alexane in the area. 60 per cent of the apartments sold so far have been snapped up by British buyers.
“We’re seeing an unprecedented opportunity,” adds Trevor Leggett. “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.”
France’s “ridiculously” low mortgage rates counter weak pound
17th October 2016
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.
Low mortgage rates sparks lending boom in France
28th June 2013
Indeed, May saw the “single largest increase in applications since 2007” for mortgage broker French Private Finance, with the high-end sector particularly witnessing a climb in activity.
“We received applications from people who have signed purchase agreements for over €20 million with a further €10 million in borrowers refinancing loans or releasing equity,” explains John Busby,
But fixed mortgage rates may be set to increase following sharp rises in the 10 year government borrowing index. The TEC 10 index, which gives an indication of how much it costs the French government to borrow money for ten years, has increased by over 0.6%, in the past month, fuelling fears of increases to the fixed rate products of offer. In recent months, the index has fallen to record lows.
Busby adds: “The mixture of ultra-low rates combined soft property prices, especially at the top end of the market, means that there are bargains to be had.”
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