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 currency update

Just as it was gearing up for roast swan and chestnut stuffing the pound suffered a setback in December. There was no single point of failure. It was the result of a combination of factors, some serious, some less so. The UK economy bore some of the blame. Some 33,000 public sector employees were laid off in a single month and none of them found new jobs in privately-owned firms. It was not what the chancellor had promised: he had promised the private sector would take up the slack. In November the public sector net borrowing requirement - the gap between tax revenues and public spending - hit a record £22.8 billion, not a clear sign that the government would be able to close the budget gap within five years. Economic growth in the third quarter of the year was downgraded from 0.8% to 0.7% at its second revision. It was not a big deal in itself but was seen as symptomatic of an intrinsically soft UK economy.

The euro has its own problems, not least the threatened downgrades of the credit ratings for government debt in Greece, Ireland, Spain and Belgium. A summit meeting of EU leaders in mid-December delivered an agreement that there should be a long-term plan to preserve financial stability but the details were sparse. Until investors see the details they will remain unconvinced. As long as they dislike the euro they will lean towards the dollar but it is difficult to tell whether they are buying it because they like it or selling the euro because they dislike it. From sterling's point of view, the euro's performance is important because Britain's economy is so closely involved with Ireland and the continent. If the euro goes down against the dollar the pound will surely follow.

The Christmas fortnight is always a dull period for financial markets. This one shows no sign of being any different. Exchange rates moved but the significance of any movements is likely to be minimal. The four cents that sterling has lost in the last month may well be important; its price action in the last ten days was always unlikely to be significant. For more news for mortgages in France please visit our website.

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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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FRENCH FIXED RATE MORTGAGES HIT HISTORIC LOWS: ATHENAMORTGAGES.COM OFFERS 20-YEAR FIX FROM 3.45%

London, August 25, 2010 – As French fixed rate mortgages hit historic lows, French mortgage specialist Athenamortgages.com launches its lowest-ever fixed rate deals, with 15-year fixed rates from 3.30%, 20-year fixed rates from 3.45%, and 25-year fixed rates from 3.60% (all at 80% LTV).

Athenamortgages.com has seen a sharp rise in the number of enquiries in August from UK buyers looking to take advantage of the cheap fixed rate deals on offer at the moment from French lenders, and September promises to be even better as fixed rates are predicted to fall even further.

The reason for these record low fixed rates has been the downward pressure on the TEC10 index, due to a combination of a low inflation environment and investors seeking the safe haven of government bonds. The TEC10 index is the benchmark index against which French fixed rate mortgages are calculated.

The TEC10 index has been steadily falling since the start of the year and has consistently been below 3% during August, reaching an all-time low of 2.60% yesterday (Tuesday, 24th August). This compares to 3.65% on 6th January 2010.

John Busby, director, Athenamortgages.com, comments: “France is in a historically low interest rate environment at the moment with average fixed rate mortgages at levels not seen since the end of 2005. At that time though the TEC10 index was well above 3%. Now with the TEC10 at 2.60% and predicted to fall even further in the coming weeks, average fixed rates could well hit record low levels in September.

“With fixed rates falling, we have seen a noticeable shift in the types of mortgages people are ringing to discuss. Fixed rates are now the overwhelming choice amongst buyers - this is not just because of the rate drop, its also because the margin between the average fixed and variable mortgage has narrowed since May, making fixed rate deals even more attractive.

“For UK investors looking for a safe, long-term investment, second home buyers or people looking to relocate to France, there has never been a better time to purchase French property. Borrowing conditions are as good as they’ve ever been, and with property prices still well below their peak, UK buyers have a great opportunity to pick up a property at rock-bottom prices and fix monthly payments for 20 plus years at fantastic rates.”

The following table gives examples of the best fixed rate deals currently available through Athenamortgages.com to UK investors looking to purchase in France:-

* For the one and five-year fixed rate deals, the rate becomes variable after the fixed rate period ends, but cannot increase by more than 1% from the initial interest rate. The rates in the table are for indicative purposes only. Rates may vary depending on the loan amount, location of the property and the profile of the client.

About TEC10

The TEC10 is the benchmark index against which French fixed rates are calculated. The index is calculated daily on long term bond yield curves and published by the French treasury.

Athena Mortgages

Athena Mortgages is the leading multilingual French mortgage broker for international buyers seeking French property finance and loans. Focusing exclusively on mortgages in France, Athena Mortgages can provide expert knowledge of the current French mortgage best buys for second homes, investment property finance, remortgage and equity release loans.

www.athenamortgages.com

Telephone London +44 (0) 207 471 4515

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Euro mortgage currency watch from MoneyCorp

After six months in the wilderness the euro has come back with a bang. Since early June it has added 11 cents against the US dollar, a rebound of more than 9%. For the first half of the year investors fretted about the debt problems of Greece and the possibility that contagion could affect Spain and Portugal. They didn't like the euro so they liked the dollar. Now, they worry that the US economy is running out of steam, even that the president will feel the need for yet more expensive stimulus measures. They don't like the dollar so they like the euro. It is the lesser of two evils.

The pre-and post-election rally did a good job for sterling, as did the new chancellor's brutal budget. Britain's AAA credit rating is no longer at risk and the pound is once again a currency that investors can buy without embarrassment. Many of them reduced their speculative short positions, giving the pound a post-budget boost. That does not mean they feel compelled to fill their boots with sterling. Some fear Mr Osborne's austerity plan could derail the recovery if it leads to large numbers of job losses in the public sector.

The euro's immediate future will depend on the reaction to the results of the 'stress test' imposed by the EU on 91 of Euroland's biggest banks. It has tested their capital structures to see if they could survive another financial crisis. Failure would mean the need for a capital injection. Brussels hopes the test will restore confidence in European financial institutions and revive interbank lending to normal levels. But the exercise is not without risk to the euro. If everyone passes with flying colours, will the results be credible or will the test be dismissed as a cynical piece of window-dressing?

For the latest euro mortgage rates please vist out website athenamortgages.com

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Mortgages in France -Why buy French property now?

Obtaining French mortgage finance for a property in France can sometimes be a daunting process as the French banks generally demand more documentation to support an application than their UK counterparts. Add the cultural and language barriers and somehow just releasing equity in the UK starts to seem like a good idea. Whilst the pound/euro exchange rate has certainly improved over the last few weeks to €1.20 to the pound in anticipation of the UK getting its finances in order, it is still 20% down on where it was a couple of years ago and in effect by paying now in pounds the price is effectively 20% higher today. Not so if you take out a euro denominated French mortgage. By keeping the finance and the purchase in the same currency the monthly mortgage payments might be higher than they would be at €1.45 to the pound but the historically low interest rates more than make up for this. The 3 month Euribor the rate upon which most variable rate mortgages in France are pegged now stands at 0.74%, + an average margin of 1.5% gives an average variable rate of 2.3%.

The whole process of getting a French mortgage can be made simple through the use of a broker. A good French mortgage broker will assess your situation and plans for your intended purchase and provide a selection of loans that will meet your criteria. At athenamortgages.com, we generally layout all the purchase costs and mortgage payments in a time line so as to provide a clear comparison between the different loans available. These comparative simulations are made after a consultation with the prospective borrower comparing up to 3 different products side by side. Currently we can offer up to 100% of the property price for a second home or investment property in France which means the exchange rate concerns are minimized with only the 8% stamp duty and taxes to pay. This loan will typically be on a repayment basis over 25 years at a rate of 3.8% capped at 4.8%. Loans with a fixed rate of 4.3% for 25 years are also available at 90% of the purchase price.

There are many good reasons why buying French property now is a good idea. For more information on the current best rates for mortgages in France please visit our best buy tables found at www.athenamortgages.com

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The effect of the UK budget on the French property and mortgage market

George Osborne’s budget today outlined some major changes to UK taxation but what effect if any will this have on the market for French property from UK buyers? The headline changes from the speech are the rises in VAT to 20% and the increase in capital gains tax to 28%. At first glance both of this rises appear to reduce the attractiveness of making investments as cash flow is effected by the rise in VAT and the long term profit of owning a second property in France is reduced by the increase in CGT.

Listening to Harriet Harman’s appraisal of the budget as being unfair on those with the lowest incomes, as proportionally speaking the increase in VAT will hit there hardest, we can glean that it some way this budget is beneficial to those on higher incomes. In many ways this is right, the effect of the intended reduction of the deficit over the term of this parliament will be of benefit to those on higher incomes, as in fact it will eventually be for everyone. With regard to the French property market, usually the preserve of those on higher incomes who are least affected proportionally by the increase to VAT, the effect of a Britain living within its means will be a stronger pound, and therefore lower costs for mortgage payments, whether the payments are regular or lump sum.

The rise in CGT may deter some UK based buyers to the French property market, these same buyers being deterred in fact from almost any form of investment, if they are overly price sensitive. Just a few years ago the rate for CGT stood at 40% (with some additional taper relief benefits) so in fact the rise could have been larger but seems to have been optimised in terms of ensuring the balance of payments to the treasury increases. As the majority of investors in France look for the long term, I do not believe the rise in CGT will have much of a noticeable effect. In fact I believe that the certainty brought about by the budget will in fact allow more people to make decisions which had been delayed pending the budget.

Overall the picture looks good for the UK and the outlook for continued excellent conditions for buying French property with mortgages in France.

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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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