French mortgage trends: 2013

French mortgage rates

French mortgage rates for non-residents have never been this good and hit a new historic low in January. 20 year fixed rates for 80% of the purchase price are now available nationwide from 3.55% with a 20 year tracker mortgage effectively from 2.20% (see the rest of the best buys below). There is currently a good level of demand from British buyers as wells as from many other parts of the Commonwealth and United States. French banks are keen to attract good clients from these areas so we have seen further mortgage rate cuts this month as there is a general willingness to lend.

One thing to note is that processing times have increased slightly over the year. In part this is due to more attention being given to each application as many of the buyers have complex financial arrangements. The underwriting criteria have also become slightly more conservative in recent times- nothing more than we would expect from a socially minded French Financial regulator! The current trend when calculating affordability is for banks to take an imaginary higher interest rate than the prevailing ultra-low rates on offer and to take payments on any interest only mortgages and convert these to repayment amounts. In addition, the maximum duration on French mortgages is now limited to 25 years for both second homes and investment properties. In effect these changes mean you have to have more income now to afford the same loan than previously but will not feel as stretched if rates go up.

Whilst annoying in many cases, we can understand and appreciate the point behind the changes and increased attention to applications from a banking system that has not suffered a sub-prime crisis. In any event, not all banks use the same criteria so it is wise to check your situation over with a broker who can guide you to the right institution to suit your financial setup.

I can see rates remaining low for the entirety of 2013 as the signs are not yet there for a return to growth in the economy. That said, there is an outside chance that if the ECB could raise rates by 0.25%, and as there would actually be little effect they might just do it.

 

Wishing you a Happy 2013 from all at FPF