French Mortgage Watch – November 2015

mount blanc

Winter is coming

The French ski season is upon us and with it an increase in the number of people visiting the Alps and placing deposits on properties to purchase. In the past 18 months we have seen over €50m invested in Châtel alone, with big resorts like Val d’Isere and Courchevel also seeing huge demand, particularly in the new-build apartment market.

The economics of French property in prime locations is still compelling. The opportunity to lock in rates at such low levels for such long periods remains extremely attractive for foreign investors. The market would not be as buoyant if the rates were 2% higher but at these low levels and average yields for prime property still in the region of 3.5 to 4% there is still a queue of investors for the opportunities on offer.

In terms of outlook, it seems more likely that the French will lower interest rates than raise them. The 3-month euribor against which many variable rate loans are decided has delved further into the negative over the last month, with the 12-month euribor only just above zero. A 20 year fixed rate still stands at 2.7% only a few basis points off its historic lows.

 

img-john-Busby-French-private-finance

JOHN LUKE BUSBY
Private Clients Director

French Mortgage Best Buys
Repayment
RateDurationLTVDescription
1.90%20 years80%Tracker mortgage 3m euribor +1.9%
2.00%25 years80%Tracker mortgage 3m euribor +2.0%
2.70%25 years85%Rate capped + 1.5% for 10 years
1.90%20 years80%Rate fixed for the term
2.90%25 years80%Rate fixed for the term
3.35%25 years85%Rate fixed for the term
Interest Only
2.30%15 years70%Tracker +1.95%
2.60%15 years75%Tracker 3 month Euribor +2.55%
3.30%15 years70%Fixed rate

France in the Press

 French economy remains in growth after Paris attacks
Economically speaking, France is not as French as it first seems but there is a desperate need for it to embrace some structural reforms
 Paris tourism recovering after attacks — minister
Tourism in Paris is starting to recover, French Economy Minister Emmanuel Macron has stated.
 First snows as resorts ready
Both the Alps and Pyrenees have seen their first substantial snowfall over last weekend. Ski resort owners are relieved, having sat through autumn temperatures that were higher than average.

Area Guide


Paris 16th Arrondissement

Le Seziem, the largest of all the 20 Arrondissements, so large it has too postcodes (75016 and 75116). Size and wealth abound, and there’s also a pretty big park too, the 3nd largest in the city.
Read more

From the blog

French Mortgage Transaction of the Month\With the 3 month euribor staying in the negative there is a sense that rates may fall further, yet this has not stopped the appetite for the current 20 year fixed-rate mortgage product.
Read more
The French property market continues to reboundThe market for resale properties in France would appear to be continuing to come out of the downturn. The third quarter of 2015 was particularly active.Read more
French property price reductions slowIn the third quarter prices increased by 0.8% compared to the second. In one year, their decline continues to slow (- 1.2% against – 2.5% the previous quarter).Read more
How to rent your Paris apartment legally through AirbnbOwners wishing to rent their second home in Paris legally via Airbnb must now change its registered use into a commercial property.Read more

 

Rate and indices

European Bank Base Rate and Euribor
The 3-month Euribor continues to head south, now dropping below the -0.110 mark. The vast majority of all French mortgages use the 3-month Euribor as their reference index with a margin added on top. Current margins are in the region of 2% over the 3 month Euribor.

french rates mortgage

Fixed rate mortgages: The TEC 10 index

The Tec 10 continues to drop and is now at around the same level it was at the start of this year. The TEC 10 index in France gives an indication of how much the French government is charged to borrow money on a 10-year basis. In this way it is also an indicator of economic confidence and the perceived outlook for growth. Movements in the TEC 10 often produce changes in the available fixed rate mortgages in France. These changes are not instant and usually take a few weeks to come into effect.

french mortgage rates

Currency Rates vs Euro

The European economic picture was muddled before the likely impact of the Paris terrorist attacks.

Near term risks to the German economy remain exactly what you think they are; export softness in a world where aggregate demand remains uncertain and a consumer base happier to save gains afforded to them via stagnant inflation levels than spend them. France’s picture is a lot more muddled and it remains to be seen whether this bright spot in growth can be sustained.

In the very near term and viewing both of these announcements through the eyes of a market hopped on stimulus expectations like a sugar-crazed 4 year old, there is little to smooth out thoughts of an increase in asset purchases or a deposit rate cut at the European Central Bank’s meeting on December 3rd and a weaker euro as a result.

Currency

1 GBP€1.42
1 USD€0.91
1 AUD€0.66
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