French mortgage rates and tips

Mortgage lending across the board through UK lenders has dried up over the past 12-24 months. This has inevitably had an impact on the ease with which British buyers can secure finance through UK banks to purchase holiday homes in France. The days when homeowners released equity from their properties to pay for that dream property in Provence are a distant memory.

Rather than using cash or remortgaging their properties in the UK to buy holiday homes in France, the French mortgage is growing in popularity. A combination of falling house prices in the UK eroding the equity that homeowners have in their properties and the UK mortgage market drying up leaving homeowners with very few remortgage options, has seen an increasing number of British buyers turning to a French mortgage as a means of financing a property purchase in France.

Also, with the Pound currently weak against the Euro, buyers can take currency fluctuations out of the equation, and potentially save thousands of pounds on the purchase, by taking out a French mortgage and holding onto the property until Sterling rallies.

For those buyers who have 15-20% deposits, French mortgages are proving particularly popular with UK buyers who can still take advantage of some of the lowest mortgage rates in French history. Although historically French lenders have had much more stringent lending criteria than the UK banks, for those borrowers who can meet these criteria, there are some exceptionally attractive fixed and variable rates on the market. It is even possible to secure 100% mortgages if the borrower has savings that amount to 30% or more of the amount they want to borrow.

It's worth noting that borrowers will have to prove they can afford the repayments on the mortgage. French mortgages work on the basis that the total of all mortgages and loans held by the borrower do not exceed one-third of their income, which means that monthly repayments on a UK mortgage will be taken into consideration when trying to fund a property purchase in France.

4 Top tips

1. Identify the area you would like to find a property in.
2. Review your financial situation with a professional French mortgage broker to find out how much you can borrow and the costs.
3. Send your broker your financial documentation and obtain a decision in principle, to be used when negotiating price with agents.
4. Finalise mortgage choice and selected a protected payment, long term capped or a fixed rate for the term.

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French mortgage rates in 2011

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

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Prezi on French mortgage market trends for 2011

How we help and the historic opportunity on Prezi

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Fixed rate mortgages in France vs UK.

Mortgage interest rates in France and across Europe are at an historic low currently which means that mortgage interest rates can only really go in one direction now. Whilst borrowers in the UK languish under the implied threat of interest rate rises owing to an UK inflation rate that is at the highest point since August 2008, the majority of their French counterparts can continue unconcerned thanks to their fixed rate mortgage in France which has a fixed rate for the term. Indeed, 70%-80% of current French mortgage holders have long term fixed rates of 15-25 years and with variable rates generally being capped and monthly payments on variable mortgages generally not allowed to increase by more than 10% per year, it is easy to see why the French are relaxed. By comparison, British borrowers live under the sword of Damocles as the majority, 70%-80% have fixed rates which are not longer than 5 years which means that there is always a chance of coming off a fixed rate into an environment of higher rates and thus substantially higher mortgage payments.

In France, the general trend is to have one mortgage to pay for a property rather than remortgaging every few years as borrowers do in the UK. The level of demand drives for fixed rate mortgages in France drives exceptionally good value deals not see in the UK. For example, at the time of writing, a French resident might fix for 25 years at a rate of 3.76%. “But that must be for a low level of loan to value!” I hear you cry. In fact this rate can be procured for 100% loan to value which makes the 5 year fix, currently available from the Co-op at 3.99% at only 75% loan to value, seem wildly overpriced. Even non residents can access a fixed rate mortgage in France with a better rate than that. Delving into the reasons for this price disparity, there are technical reasons relating to the UK banks purchases of covered bonds according to the Miles review commissioned by Gordon Brown but the main cause is the extreme price sensitivity of UK house buyers, looking at short term gain rather than long term value.

UK and Internationals buyers of French property can benefit from fixed rate mortgages in France with 4.3% fixed over 25 years at 90% loan to value being one of the most attractive deals. Unfortunately, French banks do not take charges on UK property, otherwise I am sure many borrowers in the UK would be looking to fix for the long term.

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Interest rate and exchange rate outlook from Moneycorp

One of the first letters received by Britain's new chancellor came from Mervyn King, governor of the Bank of England and guardian of the nation's 2% inflation target. The governor must write an open letter of explanation and intent if inflation strays beyond a range of 1% - 3%. In April it was 3.7% so he put pen to paper. Two years ago or more the solution would have been simple; raise interest rates to dampen demand and bring inflation back into line. In the modern post-financial-crisis world with political uncertainty at home, fiscal anarchy across the Channel and low levels of economic growth in developed countries the decision looks less straightforward, especially as the Bank sees this inflation upturn as only a temporary blip.

Although inflationary pressures in Euroland are less severe - 1.5% in the year to April as opposed to Britain's 3.7% - the legacy of the hardline pre-euro Bundesbank is to make its ideological successor, the European Central Bank, especially intolerant of rising prices. In its 11-year history the ECB has been tough on inflation, tough on expectations of inflation. It was two months after the Bank of England's policy rate bottomed at 0.5% in March last year that the ECB reached its own low point at 1.0%. And while the Bank of England was spending £200 billion buying up UK government bonds last year in order to relax monetary policy with 'quantitative easing', the ECB shied away from anything that smacked of printing money.

During the early part of this year the sensation was that, with the recession behind them and economic growth on the rebound, both the BoE and the ECB were girding their loins in preparation for bringing interest rates back up to what they consider normal levels. Europe's response to the Greek debt crisis is changing that perception. After half a dozen false starts the EU put together in May a monster €750 billion rescue plan not just for Greece but for any other country that might find itself in the same position (think Portugal, Spain, Italy). The ECB has had to soak up Greek government bonds that nobody else wants. Governments in Ireland, Italy, Spain, Portugal and, of course, Greece have imposed austerity measures involving public spending and wage cuts as well as higher (or at least better-enforced) taxes.

There can be no doubt that the severity of the measures will have a depressing effect on the economies of the countries directly involved. But it will also affect countries with whom they do (or did do) business. That means not just their neighbours in Europe but the emerging markets and commodity-producers that supply them with zinc, rubber, motorbikes and flat screen TVs. The global recovery is suddenly no longer inevitable: the risk is of a return to global recession. What worries investors now is the possibility of Global Financial Crisis II: This time it's personal.

As long as that concern persists it is unlikely that central banks in Europe - or anywhere else - will rush to tighten the screw with higher interest rates, especially as banks in the private sector are already doing that. For example, it is a matter of supreme indifference to UK consumers whether base rates are 0.5% or 1.5% when they are paying an average of 15% to service their overdraft.

Because of this it is probably fair to expect official interest rates in Britain and Euroland to remain at their current low levels into next year. There are risks to the scenario, not least the danger that inflation could re-emerge in Euroland or refuse to subside in Britain. But with half the continent held down by austerity budgets and reduced incomes it is not easy to see what might possess manufacturers and retailers to bump up their prices.

With steady-as-you-go for interest rates and no horrible economic or political surprises there would be reason to think the sterling/euro exchange rate could remain within the €1.09 - €1.19 range that it has occupied for six months. But horrible surprises have become the rule rather than the exception lately and there is no reason to suppose the show's over. If another Club Med country joins Greece in the queue for handouts the euro will suffer. If Britain's untested coalition government fumbles the task of sorting out the deficit the pound will have to take it on the chin. To paraphrase the opening line of the 1960s kids' series 'Stingray'; 'Anything can happen in the next half year!

French mortgage interest rates, look set to stay put where they are for the time being. For more information on the current best deals please call Athena Mortgages on +44207 471 4513.

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French mortgage rates 2010-2011: What next?

French mortgage rates have been relatively stable now for over a year. The only changes in the overall rates coming from changes in bank margins or if banks change their initial rate, also known as a teaser rate. So with all the turmoil in France over the huge deficit in Greece, what is the outlook for rates for mortgages in France?

French mortgage rates are based on the rate set by the European central bank which currently stands at 1%. As the EU only has one interest rate for all 16 member states, it cannot adjust the rate to help those countries that are worse off. So when considering which way the rates for mortgages in France will go, we have to look at what is happening across the EU.

The main factor affecting the ECB rate from which we get the current French mortgage rates, is the situation in Greece and the wider social problems of unemployment and rising household debt. Although the markets responded well initially to the One Trillion Euro bailout plan agreed by EU finance ministers, it was French president Nicholas Sarkozy apparently threatened to take France our of the Euro if the deal was not agreed, there is still some doubt over Greece’s ability to push through the austerity measures necessary to reduce their growing deficit and to reduce the interest rate payable on their Government bonds. The fact that some of the guarantee is coming from Portugal, Italy and Spain, who may also have problems reducing their own deficits, means there is some cause for concern, as their economies are not out of the woods yet. All this brings the Euro to an 18 month low against the Dollar today as concern spreads about the prospects for economic recovery. With the inflation rate predicted to stay low throughout 2010 and 2011, kept in check by a rising French unemployment rates, a pattern replicated the rest of Europe, the prospects for any large increases in the ECB main refinancing rate, and thus the interest rates for French mortgages, seem small for the next 18 months at least.

For a view of the current best buys and French mortgage rates please vist our website.

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French Mortgage calculator

Using a French mortgage calculator can give you a good understanding upfront of the likely cost of your mortgage in France. One question I have whenever am looking at calculators for mortgages in other countries is what is the likely rate going to be and what percentage of the property price am I going to be able to borrow. This is why on our French mortgage calculator page offers a handy idea of what the French mortgage best buys are for a range of purchase options from a classic second home mortgage to French leasebacks and Equity release options. With this information it is easier to get a top level understanding of what the likely loan payments will be on the mortgage and can help to inform you in your search for the right property and the right finance.

However, French mortgage calculators, like all mortgage calculators are offering figures in a vacuum and it is always necessary to find out if you will be able to qualify for the loan amount you would like to borrow. In order to calculate what size French mortgage you would be able to borrow, French banks apply an affordability calculation. This is based on your gross salary, you out goings for existing loan payments and any existing rental income. Take a calculator, calculate your gross annual salary on a monthly basis and then multiply this figure by .33. This will give you the amount the French banks consider you have available to spend on borrowings and loan payments on a monthly basis. From this figure you should deduct all you current monthly outgoings for loan payments and then ad 80% of any existing or future rental income you may get (N.B. French banks do not take seasonal income from holiday lets into consideration in their calculations. If you are planning to buy a property and to rent it out on an ad hoc basis, please get in touch with one of our consultants who may be able to get some of this income taken into account).

You should now have a figure which will be a good approximation of how much the French bank calculates you have to spend on a monthly payment for a French mortgage. The best way to confirm you situation is of course to speak with a professional broker who understands all the different ways French banks calculate the affordability ratio and how to get the best loan for you. Athena Mortgages are a specialist French mortgage broker and so we can offer you a fast decision in principle, telling you not only how much you can borrow in France but also send you a bespoke simulation comparing up to three mortgages side by side at a time, detailing purchase timelines, the dates when each sum will be required and also the documents required to apply for each loan. An overview of the current best French mortgages rates and our French mortgage calculator is available on our site and our consultants are available on +44 207 471 4515.

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French mortgage rates

When looking on the internet for the latest French mortgage rates, there are many sites offering this service. The temptation for most sites is to only give the lowest rates, perhaps for short durations such as fifteen years, which look attractive on the page, but leave some people disappointed when the realization hits that in fact the rate for the duration they are looking for is in fact much higher. In fairness to many of these sites the average cost per month for a €100,000 or €250,000 mortgage is also often displayed. However, many French banks still operate with an very low initial rate designed to attract customers, which distorts the figures for comparison and also the amount of the monthly payment. This initial rate or ‘taux initiale’ is usually fixed for 3 months, reverting afterwards to the 3 month Euribor + a margin. So when comparing the current rates for French mortgages, it is important compare the index the rates is based on and the subsequent margin after the initial period.

The French mortgage rates found on the best buy comparison tables on our website provide this information to the prospective borrower upfront, in order that all the information is provided clearly for the comparison to take place. There is also a handy French mortgage calculator which allows you to calculate the amount you would pay per month for each different mortgage. Unlike many other sites, there are French mortgage rates for French leaseback mortgages, French second home mortgages, French buy to let and French equity release loans to be found on our website. In addition, you can find comment on the likely next movements for mortgage rates in France to help you to

Now all this is very useful when research which broker can offer you the current best French mortgage rates for mortgages in France but are there any brokers that offer a personalised comparison document? The answer is yes, and you guessed it….Athena mortgages are the ones providing this level of comparison on a regular basis. On most of our simulations, we will compare up to 3 mortgages in addition to outlining the purchase timeline and the amounts you will need to have ready at each stage of your purchase in France. So if you would like to receive a bespoke financial simulation, comparing three suitable mortgages, just call us on +44 207 471 4515 in London or visit click to visit our French mortgage comparison table page for the latest French mortgage rates.

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EU inflation and French mortgages

With the news today that inflation has return to the Eurozone, what does this mean for the outlook for interest rates for French mortgages? The increase in consumer prices for the month of November marks the end of a five month cycle of deflation across the European economic area. The 0.6% rise was driven largely by rises in energy prices which are common at this time of year but exacerbated by the returning trend for oil speculation with traders finding it cheaper to store the oil and to take orders for delivery in six months time. This practice serves to drive up the prices but reducing the supply in the face of increasing demand as oil consuming companies look to hedge against rising costs.

This increase in inflation will increase pressure of the ECB to raise the rates for French mortgages but the pressure to not halt the shoots of growth in the economy with jobless figures still rising will mean that in the short term interest rate rises are still quite unlikely. In the longer term inflation and growth will take a firmer hold, bringing increases in French property prices as investors continue to move out of cash and into assets such as gold and property to avoid the erosion of their net position due to rising inflation. However, with the return of confidence to the market we are predicting in early 2010 and the activity in the market for ski properties we may actually see French lenders starting to decrease their margins slightly and thus their rates for French mortgages will fall in the short term, in order to remain competitive.

If you are looking to purchase in France in the coming months then it would be a good idea to speak to your broker for an up to date view on the timings of any of the rate decreases and when the each individual French bank publishes their rates in order to get the best deal. Alternatively, you can view our current best buys for mortgages in France.

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French mortgage comparison tables: Things to look out for.

Using a French mortgage comparison table is a good method for comparing the differences between mortgages in France. A few sites offer such tables but generally these French mortgage comparison tables do not go into much depth, encouraging a click to fill in an application form or prompting a call to the French mortgage broker to clarify the situation. This trend is quite sensible in fact as due to the complexities of the French mortgages on offer make it quite difficult to display all of the salient points, rendering the comparison simply of the latest rates for French mortgages relatively meaningless.

For many years French banks have used an introductory rate, generally fixed for 3 months to make an attractive headline number which many buyers in France have been drawn to when browsing French mortgage comparison tables believing that mortgages in France are similar to those in the UK. We believe that these introductory rates are a sham and should be ignored as the key rate when taking any mortgage in France which has a variable element, is the margin which the bank applies to the European Interbank Offered Rate (Euribor).

The majority of tracker mortgages in the UK track the Bank of England Base rate which moves in the main once per month. French mortgage trackers, on the other hand, track the European Interbank Offered Rate which fluctuates on a daily/hourly basis, meaning rates can fluctuate less obviously. The Euribor is the rate at which euro interbank term deposits within the euro zone are offered by one prime bank to another prime bank. Now on average these fluctuations are not huge and the disparity between the European central bank base rate and the 3 month Euribor is not more than 0.3% and currency the 3 month Euribor is in fact below the ECB base rate of 1% at time of writing.

So search for good French mortgage comparison tables and make sure you find out the margin and which Euribor index your tracker rate will be based on. Just follow this link to our French mortgage comparison table which gives you an idea of how we think the information should be presented so that you can compare the different French mortgage options properly.

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Eurozone expected to exit recession on Nov 13

The EU statistics offices anticipated to announce that the 26 nations that make up the Eurozone will officially exit recession and return to growth. In fact economic confidence in the Eurozone one was at it highest levels for a year in last month due in to increases in factory orders and production.

Inflation is trending down with no increases to the ECB benchmark rate anticipated until 2010 when a .25% rise is priced into the markets currently. Of course things can change and new information becomes available all the time. As in the UK, Eurozone home loan lending is up with these mortgage approvals boosting confidence in construction on both sides of the channel.

There is still uncertainly in the market which is good news for those looking to negotiate discounts for French properties or borrow money from French banks as the lack of inflation is keeping interest rates low. For a list of the best French mortgages available just click the link.

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Latest rates for fixed and variable rate mortgages in France decrease

The latest news from France is that rates are decreasing due to competition for mortgages between banks. One of the biggest specialist French mortgage lenders has recently dropped its rates by 15%. This 15% rate drop is anticipate to spread through banks that offer mortgages in France and interestingly the drops apply to both the spreads/margins the bank charges above the Euribor* on the loans and the initial rates.

For the variable repayment French mortgage, the rate which was previously 2.8% and has now dropped to 2.3% with a margin over the Euribor* of 1.3%. For a five year fixed rate French mortgage the rate was 4.25% with the current rate now standing at 3.95%.

These are some of the best rates for mortgages in France currently and also compare very favourably with rates for mortgages in the UK. Having been personally looking for borrowing in the UK recently the remortgaging options where all for fixed rates over 5% and for a variable rate mortgage the spreads/margins over the base rate were all over 2% for a 75% LTV mortgage.

To find out what the latest, best rates are for fixed and variable rate mortgages in France just visit the best French mortgage rates section on the Athena Mortgages website

*The Euribor (Euro Interbank offered rate) is the equivalent of the Bank of England base rate in the UK. Most French mortgage rates are pegged to the Euribor which, unlike the Bank of England base rate, fluctuates everday. Essentially, the Euribor is the rate at which European banks will lend money to each other for period of time e.g.3,6 or 12 months. as of time of writing the current Euribor rates are as follows. 3 month 0.730%, 6 month 1.019% and 12 month 1.254%.

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French mortgage rates in 2010

Predicting interest rates and French mortgage rates is a game that can win you millions if you work in the city but at the cold hard face of decisions about which French mortgage to take out, looking at trends may save you some money.

The pound strengthened today on the back of the Mervyn King's speech last night in Edinburgh to €1.11 indicating that a rise in UK interest rates is not as a far away as was previously thought. 'I do not know for how long interest rates will remain so low but at some point they will return to more normal levels' King said 'And it would be wise to take this into account in your financial planning.'Indeed, interest rate futures in the States are pointing to a rise in U.S interest rates within a few months and generally what happens in the U.S first, soon comes to the UK and to then to Europe making the outlook for French mortgage rates higher in 2010.

So although the UK and EU each have different issues to contend with, huge budget deficit on the one hand and a currency that was not designed to replace the dollar become the world's haven of strength on the other, it is not hard to see that if the American begins to recover and heat upagain it will not be long before the UK and EU catch the fever. If you are considering investing in a French property soon, take a look at the current French mortgage rates because rates for French mortgage in 2010 may be very different.

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