So as another year draws to a close in the heady world of French mortgages, it is always useful to look back and reflect on what the year has brought us. This time last year, we were experiencing some of the lowest ever fixed rates seen in France with the record set around 3.35% fixed for 20 years. Not bad if you can get it. As inflation began to unsettle the then head of the European Central Bank Jean-Claude Trichet, we saw increases in the main ECB rate from 1% back up to 1.50%. These increases put the brakes on the mini boom in French property prices which saw Paris experiencing off the chart price rises, whilst France as a whole was ticking over at a respectable 6% average for the year.
The eventual unraveling of a policy of lack of effective decision making by the top ministers of Europe, led to the markets seizing on Sovereign and AAA debt and pushing the cost of refinancing that debt higher across the board, even the Germans pay more…The unease brought about by the sheer scale of exposure to the debts of the less fiscally responsible nations has led to increase in the mortgage rates for new customers across the board despite the recent decrease in the main refinancing rate by the ECB to 1.25% with further cuts predicted.
These cuts are not being passed on the form of cheaper variable and capped rate loans for new customers as banks maintain or increase their margins in readiness for impending new Basle III capital base ratios and to pay for the increased costs of wholesale borrowing. Competitive rates are still available for a number of local banks in France with a 20 year fixed rate possible at 4.25%. Now that’s less than 1% of the all time lowest rate, there now, that should cheer everyone up!
Happy Christmas/Festive Season from all of us here at French Private Finance.