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.
JOHN LUKE BUSBY
Private Clients Director
|French Mortgage Best Buys|
|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|
|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.|
|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.|
|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.|
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.
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.
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.