French mortgage rates drop to record lows

Rate decreases on government bonds and an increasingly bullish buyer’s market in France have pushed mortgage rates down to their lowest levels ever recorded. Average lending rates have now dropped to 2.85% from the previous lows of 2.90% recorded in May 2013 and this movement is only likely to fuel the property market further.

“Since the start of the year government bonds have decreased by almost 70 basis points (0.7%) and this has pushed high street lending down even further,” said John Busby at French Private Finance. “These lowest-ever average rates are reflected in the lower margins on variable rates, as banks are being forced to be extra competitive for domestic and non-resident buyers.”

“In real terms for non-resident buyers rates as low as 3.25% fixed for 20 years can now be achieved, which compared to other mortgage rates in Europe is incredible value,” adds Busby. “Even before this latest drop, non-residents were capitalising on the market; in our busiest week across the ski property season we were handling non-resident applications with a total value of over €38m.”

The availability of lending has been the linchpin to the French market over the last 9 months with some companies posting record sales from the ski season…

In the six months from Dec ’13 to May ’14 French property specialists Athena Advisors saw an 85% increase on property sales for the same period the previous year, posting sales of French property to non-residents of over €50m.

“It took a while but international buyers are now realising the significance of the current deals available in the French mortgage market,~” says Nicholas Leach at Athena Advisors. “Being able to fix rates for long periods at such low levels means that, unlike in the UK for example, people can easily plan their long term finances for their second home or buy-to-let property. The lure of these new rock bottom rates coupled with the long term security typical of this market, means we’ll see more people releasing idle savings and investing them in French property.”

“The significant factor for the market is that buyers at all levels are utilising the cheap borrowing rates. An increasing number of buyers with budgets over €3m and who can afford to pay cash are still choosing to finance their purchase, often through private French banks.”