Banks stormed by domestic applicants looking to renegotiate

Even before mortgage rates in France actually started rising, the French were moving to renegotiate their loans. Today the pattern is very simple. French banks are increasingly being taken over by private individuals wishing to get the best possible rate on their existing mortgage, or take out a new one, before the rates go up even further.

It’s worth remembering that the French mortgage system is different to that of the UK, particularly in the area of loan duration. In the UK, fixed rate mortgages are normally fixed for 2-3 years, at which point they either revert to a higher rate or simply turn into variable mortgages. Therefore remortgaging in UK happens quite often. In France fixed rate mortgages are normally fixed for at least 15-20 years and they rates are very low comparatively (less than 3.0% fixed for 20 years).

For the past two years, domestic buyers and mortgage holders have been watching rates go lower and lower. Waiting another month to remortgage their home and seeing the rates drop another 0.2% would save them thousands of euros on the interest payable over the full term. Now rates are moving the other way and all the people who were waiting are now trying to get to the front of the queue.

In recent weeks, the majority of large networks have increased their rate from 0.01% to 0.35% on average in the wake of rising 10 year government bond rates, which are a benchmark for fixed-rate home loans. The bank LCL has increased theirs twice since May (0.10% in May and 0.15% in June). Only the Banque Postale and some regional banks large institutions are the exception to the rule. But for how long will they hold out? The general consensus is that mortgage rates will continue to rise beyond the summer.