French Mortgage Watch – January 2015

french alps property

Who feels 20% better off?

With a planned injection of more than 1 trillion euros into the European economy we are most likely entering a decade of unprecedented buying conditions in France. The euro has now weakened by an average of 12% against many major currencies making it easier to afford deposits or properties bought with cash. It is now also easier to afford mortgage repayments and therefore the amount of money people can borrow in France has also increased by 12%. Essentially everyone is now 12% more likely to buy a French property.

How is this possible?

Lets take a moment to review what we have as of today. The lowest ever mortgage interest rates? Yes. Soft property prices? Yes. Good outlook for growth in the long term due to quantitative easing leading to tangible asset (house price) inflation? Yes. Foreign currencies at between six and eleven year highs on the euro? Yes, definitely more bang for your buck.

Take a look at the table below to see how things have improved over the last 10 months.

advice for french mortgages
French Mortgage Best Buys
Repayment
RateDurationLTVDescription
2.00%20 years80%Tracker mortgage 3m euribor +1.9%
2.10%25 years80%Tracker mortgage 3m euribor +2.0%
2.85%25 years85%Rate capped + 1.5% for 10 years
2.75%20 years80%Rate fixed for the term
3.15%25 years80%Rate fixed for the term
3.30%25 years85%Rate fixed for the term
Interest Only
2.30%15 years70%Tracker +1.95%
2.65%15 years75%Tracker 3 month Euribor +2.55%
3.55%15 years70%Fixed rate

Why should buyers be positive about French property in the long term?

Right now France is definitely a buyers market, as we’ve explained above. However the one thing which purchasers remain cautious over is property prices. Its always wise to be cautious yet if we look at the below chart we can see that French house prices have more or less followed UK house prices over the last 25 years.

So what has caused the change over the last 6 years?

One possible answer is the lack of QE in the European market. Six years ago the UK started printing money and the property market took off again. With some ups and downs depending on location, UK property has once again become a source of wealth creation. Now the UK is a much smaller market than the EU but it is not too much of a stretch to hope that the money being printed in Europe will find its way into property as it has in the UK and set house prices increasing in across France again, especially in the most sought after locations.

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France in the Press

France has made the headlines in many ways this month, but here are some interesting articles relating to the French economy & tourism in Paris.

Despite a difficult 2014, France is still far from being the ‘sick man of Europe’

New regulations to give boost to French economy

Paris Reassures Tourists Over Safety After Terror Attacks

Property of the month

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Val d’Isere

  • Extremely rare new-build apartments
  • Up to 80% LTV mortgages available
  • Central ski-in location
  • Great views of peaks & village

Find out more

From the blog

Transaction of the month – Big savings by Swiss expat

This month’s transaction of the month is by a british expat based in Switzerland. He saw his targeted property – a villa in the South of France – reduce in price by 15% overnight after Switzerland release the rate cap on the Euro. Read more

Luxury real estate in France is getting cheaper for Americans

The country is home to the largest contingent of the world’s wealthiest 1% and for them, France has become a much more affordable.

Read more

Record low French mortgage rates…continued

Since late 2011 mortgage rates in France have fallen by 1.63%, accordingly the latest figures published by Crédit Logement.

Read more

Mario Draghi launches €1.1 trillion quantitative easing programme

It has been a long time coming, but European Central Bank (ECB) president Mario Draghi finally unveiled his quantitative easing plan and it was bigger-than-expected.

Read more

Rate and indices

European Bank Base Rate and Euribor
The changes in the ECB rate generally drive changes to the Euro Interbank Offered Rate (EURIBOR). 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.

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Fixed rate mortgages: The TEC 10 index

Following the series of announcements by Mario Draghi the TEC 10 has now dropped to it’s lowest ever level this week of 0.55%. 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.

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Currency Rates vs Euro

January has been the month that has seen the euro start to fall apart. The single currency has hit 7 year lows versus sterling and 11 year lows against the USD this month as investors have reacted to the European Central Bank’s decision to finally launch an asset purchase plan designed to stimulate the European economy and the results of the Greek election. Banks are lining up to see which one can call the euro the lowest in the coming months, and the combination of this QE plan and the near-term strength of the US and UK economies should continue the single currency’s relative decline.

Currency

GBP1.338
USD0.880
AUD0.701
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