10 year low for EU Central Bank rates

The EU central bank today confirmed that it was keeping its rates steady at 1.00%. This rate has been in effect since May of this year and continues to provide support for French property prices which remain stable according to the November press release from the FNAIM, the national Federation of estate agents in France. Average property prices rose in October by 0.6% and the overall drop in the average price of French apartments and houses is now reckoned at 5% for the year. With the Eurozone and France both now having exited the recession and showing signs of growth the outlook is positive for rates for mortgages in France and French property prices.

Although the news today came as no surprise, it is interesting to see that the general consensus for the way in which the French mortgage market and French property market will evolve is currently going to plan. If we look across the water to the US figures released today from a survey by Freddie Mac, the giant US government owned mortgage syndication company, indicated that 30 year fixed rate mortgages are now at their lowest level for 10 years. The rates for these mortgages have been falling for the last 5 weeks and now stand 4.71% down from 4.78% just one week ago according to Reuters news agency. Variable French mortgage interest rates are very low starting at just 2.3% and with the rates for long term loans also decreasing, now standing at 4.5% for a 30 year fixed rate in France at 80% LTV, showing that the money from the economic stimulus packages is definitely filtering into the global economy with many institutions now ready to borrow huge sums and to lend this money on into a rising market over the next 20 years.

So what does this all mean for the outlook for the French property market? Well, it would seem that prices will inevitably start rising as the money from the quantitative easing finds its way into the hands of those who are capable of obtain a mortgage in France. The timing and scale of the increases depends on the speed at which the economy takes off again but certainly within 5 years the increases in French property prices would realistically seem to be substantial providing the period of unconfident growth we are entering only lasts for 3 years. The effects of inflation, energy prices, unemployment rates and of course confidence will all have their parts to play over the coming 12 months making this a very interesting time for both French property and French mortgage markets.

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