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.
JOHN LUKE BUSBY
Private Clients Director
|French Mortgage Best Buys|
|1.90%||20 years||80%||Tracker mortgage 3m euribor +1.9%|
|2.00%||25 years||80%||Tracker mortgage 3m euribor +2.0%|
|2.70%||25 years||85%||Rate capped + 1.5% for 10 years|
|1.90%||20 years||80%||Rate fixed for the term|
|2.90%||25 years||80%||Rate fixed for the term|
|3.35%||25 years||85%||Rate fixed for the term|
|2.30%||15 years||70%||Tracker +1.95%|
|2.60%||15 years||75%||Tracker 3 month Euribor +2.55%|
|3.30%||15 years||70%||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.|
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.
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.
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.