French Mortgage Watch – May 2015

french mortgage watcher

French mortgage fixed rates set to follow rise of 10-year government bonds 

Until recently 10-year government bond rates around Europe stood at about 0.50%, which is an ultra-low return and is indicative of a market that is concerned about growth*. Over the past few weeks this rate double to 1% and sent jitters through the economy, largely because it was unexplained. The doubling of the rate indicated a sharp rise in confidence and perhaps a sign of interest rate rises in France.

As the billions of euros printed by the ECB entered the market, some funds and investors decided to follow this money and invest into the stock markets instead of buying government bonds. With a lack of investors, some bond issues were not fulfilled in the 5 minutes it normally takes and the returns on the bonds were increased to attract more investors. In the last week we have seen bond yields slip back a bit though the previous increase has led a few banks to raise interest rates slightly by 0.1-0.3%. Some banks will follow and some will stay the same keeping mortgage rates as they are, so we expect rates to potentially fluctuate in this range for the next two months.

In effect the increase is small with a 0.20% rise from 2.55% to 2.75% on a €100,000 20-year fixed rate mortgage adding €10 to monthly repayments. The interest payable over the full term would increase almost €2,500, from €27,176 to €30,119. Even though this rise is not large, for clients in the process of applying now we are advising them to get their documentation in line as soon as possible to try and avoid this rate increase if possible**.

*A 10-year government bond rate is the amount of interest the government pays on new money it is borrowing from investors/funds who could also invest in the stock market.

**Most French banks will fix the current rate for clients once all the documentation has been supplied.

 

img-john-Busby-French-private-finance

JOHN LUKE BUSBY
Private Clients Director

French Mortgage Best Buys
Repayment
Rate Duration LTV Description
1.95% 20 years 80% Tracker mortgage 3m euribor +1.9%
2.05% 25 years 80% Tracker mortgage 3m euribor +2.0%
2.55% 25 years 85% Rate capped + 1.5% for 10 years
2.70% 20 years 80% Rate fixed for the term
2.85% 25 years 80% Rate fixed for the term
3.20% 25 years 85% Rate fixed for the term
Interest Only
2.20% 15 years 70% Tracker +1.95%
2.60% 15 years 75% Tracker 3 month Euribor +2.55%
3.45% 15 years 70% Fixed rate

France in the Press

France’s strong economic growth figures and continued position as a tourism heavyweight are the headlines this month.

Eurozone recovery accelerates as France and Italy return to growth

France is top dream destination for Chinese

Record foreign investment, but is red tape holding France back?

Property of the month

Property-of-the-Month-Chamonix
Chamonix
Le Grand Paradis
From €295,000

  • 1-3 bedroom apartments
  • Views of Mont Blanc
  • Fantastic central location

Find out more

From the blog

Transaction of the month – second time lucky for alpine buyersThis month we look at how the initial rate offered to our client by another broker didn’t materialise and they ended up missing out on their original preferred property.
Read more

Construction to pick up soon in France

There is light at the end of the tunnel for the French property construction sector.

Read more

France moves further up world tourism competitiveness rating

In the latest biennial rankings from the World Economic Forum (WEF) France has jumped five places, up from seventh to second on the ‘tourism competitiveness rating’.

Read more

French economy smashes expectations and moves past Germany, UK & US

France has pulled its weight in the Eurozone economy in Q1 with larger-than-expected growth figures putting Germany, UK and the US in the shadows.

Read more

Rate and indices

European Bank Base Rate and Euribor
The 3-month Euribor rebounded a little this month to 0.013% from a all time low of 0.005%. 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.

mortgage in the french market

Fixed rate mortgages: The TEC 10 index

As we explain above, the movement in the Eurozone money markets saw the Tec 10 rebound considerably, rising above 1.01% in early may and resting around 0.85%. 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 mortgage approval

Currency Rates vs Euro

Sterling is roughly flat against the euro over the course of the past month. Of course that belies the volatility that we have seen in GBP in the lead-up to the election and the rally higher following the news of a majority government. Growth seems to be returning well in Europe with the latest run of GDP data set to show the Eurozone is growing at 0.4%, faster than the UK’s 0.3%. Weakness around the Greek situation will remain until a deal with creditors is reached. February’s extension means both parties have until the end of June to agree. Should they fail the market fears of a Greek exit may be realised.

Currency

GBP 1.40
USD 0.92
AUD 0.70

French-Private-Finance-World-First

french mortgage watcher

French mortgage fixed rates set to follow rise of 10-year government bonds 

Until recently 10-year government bond rates around Europe stood at about 0.50%, which is an ultra-low return and is indicative of a market that is concerned about growth*. Over the past few weeks this rate double to 1% and sent jitters through the economy, largely because it was unexplained. The doubling of the rate indicated a sharp rise in confidence and perhaps a sign of interest rate rises in France.

As the billions of euros printed by the ECB entered the market, some funds and investors decided to follow this money and invest into the stock markets instead of buying government bonds. With a lack of investors, some bond issues were not fulfilled in the 5 minutes it normally takes and the returns on the bonds were increased to attract more investors. In the last week we have seen bond yields slip back a bit though the previous increase has led a few banks to raise interest rates slightly by 0.1-0.3%. Some banks will follow and some will stay the same keeping mortgage rates as they are, so we expect rates to potentially fluctuate in this range for the next two months.

In effect the increase is small with a 0.20% rise from 2.55% to 2.75% on a €100,000 20-year fixed rate mortgage adding €10 to monthly repayments. The interest payable over the full term would increase almost €2,500, from €27,176 to €30,119. Even though this rise is not large, for clients in the process of applying now we are advising them to get their documentation in line as soon as possible to try and avoid this rate increase if possible**.

*A 10-year government bond rate is the amount of interest the government pays on new money it is borrowing from investors/funds who could also invest in the stock market.

**Most French banks will fix the current rate for clients once all the documentation has been supplied.

 

img-john-Busby-French-private-finance

JOHN LUKE BUSBY
Private Clients Director

French Mortgage Best Buys
Repayment
Rate Duration LTV Description
1.95% 20 years 80% Tracker mortgage 3m euribor +1.9%
2.05% 25 years 80% Tracker mortgage 3m euribor +2.0%
2.55% 25 years 85% Rate capped + 1.5% for 10 years
2.70% 20 years 80% Rate fixed for the term
2.85% 25 years 80% Rate fixed for the term
3.20% 25 years 85% Rate fixed for the term
Interest Only
2.20% 15 years 70% Tracker +1.95%
2.60% 15 years 75% Tracker 3 month Euribor +2.55%
3.45% 15 years 70% Fixed rate

France in the Press

France’s strong economic growth figures and continued position as a tourism heavyweight are the headlines this month.

Eurozone recovery accelerates as France and Italy return to growth

France is top dream destination for Chinese

Record foreign investment, but is red tape holding France back?

Property of the month

Property-of-the-Month-Chamonix
Chamonix
Le Grand Paradis
From €295,000

  • 1-3 bedroom apartments
  • Views of Mont Blanc
  • Fantastic central location

Find out more

From the blog

Transaction of the month – second time lucky for alpine buyersThis month we look at how the initial rate offered to our client by another broker didn’t materialise and they ended up missing out on their original preferred property.
Read more

Construction to pick up soon in France

There is light at the end of the tunnel for the French property construction sector.

Read more

France moves further up world tourism competitiveness rating

In the latest biennial rankings from the World Economic Forum (WEF) France has jumped five places, up from seventh to second on the ‘tourism competitiveness rating’.

Read more

French economy smashes expectations and moves past Germany, UK & US

France has pulled its weight in the Eurozone economy in Q1 with larger-than-expected growth figures putting Germany, UK and the US in the shadows.

Read more

Rate and indices

European Bank Base Rate and Euribor
The 3-month Euribor rebounded a little this month to 0.013% from a all time low of 0.005%. 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.

mortgage in the french market

Fixed rate mortgages: The TEC 10 index

As we explain above, the movement in the Eurozone money markets saw the Tec 10 rebound considerably, rising above 1.01% in early may and resting around 0.85%. 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 mortgage approval

Currency Rates vs Euro

Sterling is roughly flat against the euro over the course of the past month. Of course that belies the volatility that we have seen in GBP in the lead-up to the election and the rally higher following the news of a majority government. Growth seems to be returning well in Europe with the latest run of GDP data set to show the Eurozone is growing at 0.4%, faster than the UK’s 0.3%. Weakness around the Greek situation will remain until a deal with creditors is reached. February’s extension means both parties have until the end of June to agree. Should they fail the market fears of a Greek exit may be realised.

Currency

GBP 1.40
USD 0.92
AUD 0.70

French-Private-Finance-World-First