French Mortgage Watch – July 2015

mortgages in france

95% of valid applicants snap up low-rate French mortgages 

The French property market has performed exceptionally well in the first half of this year. The recent success follows an excellent final quarter of 2014 driven by the upturn of confidence in the UK economy, the strengthening of the pound and the fall of French mortgage interest rates to rock bottom lows.

Whilst financing options and underwriting criteria have become stricter over the past months due to the surge in lending, it is worth pointing out that once we take on a validated application, we have seen a 95% success rate so far this year.

Buyers continue to be drawn to Paris, the Alps and the south coast snapping up new build property as well as maisons de caractere. This upsurge has lead to an increase of almost 100% in successfully financed deals, with around €100m worth of loans either completed or to be complete by the end of the year. 65% of this has been retail mortgages with an average value of €600,000, with private banking, bridging loans and commercial finance making up the remainder.

We are looking forward to an equally busy second half of the year as French banks try to get their house in order during the August period in order to cope with the new dynamic of increased applications and with the alpine season around the corner. Until then French mortgage rates should stay more or less as they are, with excellent products on offer to most non-residents.

 

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JOHN LUKE BUSBY
Private Clients Director

French Mortgage Best Buys
Repayment
Rate Duration LTV Description
2.05% 20 years 80% Tracker mortgage 3m euribor +1.9%
2.25% 25 years 80% Tracker mortgage 3m euribor +2.0%
2.70% 25 years 85% Rate capped + 1.5% for 10 years
2.70% 20 years 80% Rate fixed for the term
3.00% 25 years 80% Rate fixed for the term
3.20% 25 years 85% Rate fixed for the term
Interest Only
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

 France & Britain see euro reform as possible “win-win”
Governments on either side of the channel have agreed that a shoring up of the single currency after the Greek crisis could go hand-in-hand with wider reforms the UK needs in order to stay in the EU.
 The bleeding edge of globalization: France’s controversial economic reforms
Over the past few month’s France has once again proven its position as a global political and economic heavyweight, but it has some big challenges ahead.
 French business sentiment rose more than expected
The index for confidence in French manufacturing rose to 102 in July from 100 in June as business leaders were more confident about their order books and recent output.

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

Transaction of the monthForeign expats living and working in the UK are also making the most of the current market in France, as is shown by this month’s transaction of the month.
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French mortgages: almost all banks have raised their ratesOver the last two months some thirty banks have increased their rates, sometimes by up to 0.4%. But the demand for French mortgages remains strong.

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No of French mortgages signed by the domestic market jumps 28% in one yearThe prolonged decline of French mortgage rates has encouraged more and more French to become homeowners.

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Despite demand, French housing construction is still decliningThe construction volume of new homes continued to shrink in France in the second quarter, even though there were positive signals from the number of sales.

Read more

 

Rate and indices

European Bank Base Rate and Euribor
The 3-month Euribor has remained at the same level this month, there or thereabouts in the face of continued negative sentiment. 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 after its rally in June, matching that of the 3 month Euribor. 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

Whilst the soap opera that is the Greek economy and its involvement in the single currency is giving most a dull headache, day-to-day investors continue to capitalise on the market as it is. More positive growth for the UK, expanding by 0.7% in Q2 gave further fuel to the fire, enabling sterling to scratch out some of the gains the euro made after the noise of agreement over the last few weeks. For the USD, it looks as though 2 rate rises are on the cards this year, with the first coming in September.

Currency

1 GBP €1.42
1 USD €0.91
1 AUD €0.66

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