In August 2010 the TEC 10 index, which is used to price fix long term loans in France, reached its lowest ever level at 2.53%, and in October a report published in France revealed the average rate for mortgages in France was at its lowest level since the Second World War. The average rate in October 2010 stood at 3.30% which, when you consider the average French loan term is more than 15 years, shows just how attractive rates are. The Euribor 3 month, which is the index used to price billions of Euros of variable interest rate non-resident mortgages, has risen 30% in the last 6 months and now stands at 1.030%, just above the normal pre-crisis range and margin of the benchmark European Central bank rate of 1%.
At the time of writing (December 2010) the Tec 10 has risen 20% to 3.12% since the end of August 2010, perhaps heralding the beginning of the end of these historically low interest rates. You can still get a 25-year fixed rate at 3.8% or 3.5% over 15 years at 80% of the purchase price, which in UK terms is still impressive. Tracker mortgages on the 3 month Euribor for an 80% mortgage start at 2.35% on a 25-year term. At 100% LTV you can secure a rate of 3.15% which can never increase beyond 5.15% over a 25-year period.
So where next for rates in 2011? We may see some fluctuation in the Euribor but in general any increases to mortgage rates in 2011 are likely to be small. The majority view is that we may not see the European Central Bank base rate increase until Q4 2011 and perhaps not until late 2012. Austerity measures across Europe will bite, reducing inflation and growth, meaning there is little need to raise rates. So thoughts turn to the currency element of the purchase in France. We can expect widespread austerity measures – including reductions in government spending and tax increases – implemented across Europe next year. These measures will bring about an increase in the numbers of unemployed, which is a recipe for lower growth and inflation. And with the trend for banks to be rebuilding their balance sheets with more conservative lending to businesses, and thus reducing the cash investment to get the economy moving again, we can see why interest rates, which increase when the economy is growing, are not expected to rise much in 2011.
The Pound has fallen 30% over the past three years. This is largely due to our structural deficit, which is one of the largest in Europe. The other factor is the irrational state of the market, previously, where there was too much cash chasing too few assets. This bubble also inflated Sterling to the point where what seems like a 30% drop is in fact a pretty good valuation which may be with us for some time.
The UK outlook is for low growth as our housing market is still unaffordable for many, compounded by a lack of lending from the UK banks. The Pound has recovered from near parity with the Euro in 2009 and is now hovering around the 1.20 mark, based on confidence from the market in the UK Government’s spending plans. In Europe the increasing deficit problems and lack of investor confidence in Portugal, Greece, Ireland and Spain is a worry for many. The ECB is buying bonds from these countries and is managing well to reduce the amount of money the ‘PIGS’ have to pay to borrow on the international market for the spending plans. All things being equal, we should see a stable year between this currency pair with the Pound continuing to trade around the €1.20 mark. As 60% of UK trade is with the EU, it is likely that we will fall and rise together. To keep up to date with mortgage news in France, just visit the news section on our site or register for our newsletter.
Best wishes for the festive season and New Year.
The athenamortgages.com Team
At the time of writing (December 2010) the Tec 10 has risen 20% to 3.12% since the end of August 2010, perhaps heralding the beginning of the end of these historically low interest rates. You can still get a 25-year fixed rate at 3.8% or 3.5% over 15 years at 80% of the purchase price, which in UK terms is still impressive. Tracker mortgages on the 3 month Euribor for an 80% mortgage start at 2.35% on a 25-year term. At 100% LTV you can secure a rate of 3.15% which can never increase beyond 5.15% over a 25-year period.
So where next for rates in 2011? We may see some fluctuation in the Euribor but in general any increases to mortgage rates in 2011 are likely to be small. The majority view is that we may not see the European Central Bank base rate increase until Q4 2011 and perhaps not until late 2012. Austerity measures across Europe will bite, reducing inflation and growth, meaning there is little need to raise rates. So thoughts turn to the currency element of the purchase in France. We can expect widespread austerity measures – including reductions in government spending and tax increases – implemented across Europe next year. These measures will bring about an increase in the numbers of unemployed, which is a recipe for lower growth and inflation. And with the trend for banks to be rebuilding their balance sheets with more conservative lending to businesses, and thus reducing the cash investment to get the economy moving again, we can see why interest rates, which increase when the economy is growing, are not expected to rise much in 2011.
The Pound has fallen 30% over the past three years. This is largely due to our structural deficit, which is one of the largest in Europe. The other factor is the irrational state of the market, previously, where there was too much cash chasing too few assets. This bubble also inflated Sterling to the point where what seems like a 30% drop is in fact a pretty good valuation which may be with us for some time.
The UK outlook is for low growth as our housing market is still unaffordable for many, compounded by a lack of lending from the UK banks. The Pound has recovered from near parity with the Euro in 2009 and is now hovering around the 1.20 mark, based on confidence from the market in the UK Government’s spending plans. In Europe the increasing deficit problems and lack of investor confidence in Portugal, Greece, Ireland and Spain is a worry for many. The ECB is buying bonds from these countries and is managing well to reduce the amount of money the ‘PIGS’ have to pay to borrow on the international market for the spending plans. All things being equal, we should see a stable year between this currency pair with the Pound continuing to trade around the €1.20 mark. As 60% of UK trade is with the EU, it is likely that we will fall and rise together. To keep up to date with mortgage news in France, just visit the news section on our site or register for our newsletter.
Best wishes for the festive season and New Year.
The athenamortgages.com Team
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