French Mortgage Watch – August 2015

french mortgage wage

The French return, but the Chinese disappear  

The end of August heralds the return of many French who enjoy a large portion of the month of August away from work. The beginning of September is called “La Rentrée” and marks the time when things can start getting done again within a reasonable timeframe. The French property market for non-resident buyers looks to be in the same good shape it has enjoyed since September last year. Sales of prime and super prime assets continue to go through each month with the mid range of the market also showing very good activity.

Despite small increases recently in the range of 0.1% to 0.2% French mortgage fixed rates are stable at the moment and should remain so for the next quarter at least. The only recent surprise has been the dynamic effect of the recent falls in the Chinese stock market, which have caused investors to put money into the euro economy. They are buying euros as they see it as a safe haven currency. This caused the euro to appreciate by 5% against the Dollar and Sterling.

The Chinese government acted by cutting interest rates by 0.25% to 4.6% and also reduced capital rations for banks by 0.5% in order to encourage lending and create additional market support for its 7% annual growth target.

The confidence that investors have in the Eurozone is a good signal for the European property market. The fundamentals are still there with a relatively weak euro and ultra low interest rates for the medium term. With no signs that the ECB will raise its base rate the buying spree from international investors in France should continue.

 

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JOHN LUKE BUSBY
Private Clients Director

French Mortgage Best Buys
Repayment
RateDurationLTVDescription
2.05%20 years80%Tracker mortgage 3m euribor +1.9%
2.25%25 years80%Tracker mortgage 3m euribor +2.0%
2.70%25 years85%Rate capped + 1.5% for 10 years
2.70%20 years80%Rate fixed for the term
3.00%25 years80%Rate fixed for the term
3.20%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

 How France finally bowed to the global economy
After holding out for many years, France will soon allow some stores to stay open on Sundays and late during the week in a move to create more jobs and boost the economy.
 France’s Economic Challenges
Hundreds of French executives and politicians are gathering at the annual MEDEF University event as the threat from China’s slowdown looms.
 France economic growth to pick up pace: survey
French economic growth will accelerate slightly in the third quarter, a business survey by the Bank of France showed.

Area Guide


Cannes, Côte d’Azur

On the coast, glamour is well established, but venture inland and Cannes also becomes a true southern village. Get lost in streets or picturesque stairways, before going back for 3D thrill on the Croisette.

Read more

From the blog

Transaction of the monthThis month’s transaction of the month is on a large villa in the South of France. With a loan value of €3m and a property price of €5m, the client put down a reasonably sized deposit of 40% and bought using an SCI.
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Real estate: international buyers have three days less to reflect on their purchaseAfter almost fifteen years the amount of time people had to give final reflection on their house purchase has changed, with those in France getting longer and international buyers getting less time.

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In the Loire Valley, property is 30% cheaper than anywhere elseIt’s a region that is in 4th spot for GDP per capita, it has the lowest unemployment rates in the country and the 3rd highest population growth across all 13 regions, but property there is still cheap by comparison.

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In France, new home sales continue to growSales of new homes in France continue to accelerate. They were up 21.8% in the second quarter compared to the same period of 2014, confirming the rebound that was seen in the fourth quarter of last year.

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Rate and indices

European Bank Base Rate and Euribor
The 3-month Euribor rebounded slightly this month. 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 alps mortgages

Fixed rate mortgages: The TEC 10 index

The Tec 10 has dipped a little further after its rally in June, but is still much higher than the lows seen over Q1-Q2 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 mortgages

Currency Rates vs Euro

Movements in China saw the Euro make quick gains on both sterling and the dollar and whilst the China crisis seems to have receded slightly, it remains to be seen what long term effects, if any, there will be on the euro. The only thing that can be strongly considered is that the Fed and Bank of England will push back their proposed interest rate hikes, perhaps by a few months, which may provide stability to currencies in the mid-term.

Currency

1 GBP€1.37
1 USD€0.89
1 AUD€0.63
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