21 May 2019 - French Mortgage News | International Mortgage News | Partners News |

Euro Mortgage Outlook: May

The outlook for interest rates across the globe has muddied over recent months. Global uncertainties in several areas (the outcome of Brexit, the US/China trade war to name but two) have done nothing to simplify the situation.

Expectations are now that the next move in interest rates in the US, UK, and Europe could just as easily be down as up, reducing borrowing costs for governments and homeowners alike.

The political situation in the UK is no nearer being resolved and the only thing that seems clear, whichever side of the Brexit divide you sit on, is that a satisfactory outcome seems further out of reach than ever.

Against that backdrop, many major economies seem to be performing surprisingly resiliently, particularly in terms of employment figures. The UK is currently experiencing it’s lowest unemployment levels since 1974.

Brits are still buying in France and Spain

Interest in buying second homes in popular locations remains strong and a lack of clarity on when current political distractions will be resolved means that an increasing number of buyers are deciding not to let this uncertainty derail their plans indefinitely. In France, the percentage of non-resident buyers is growing slowly at 1.6% in 2017 vs a low of 1% in 2015 and a high of 2.8% (2006 – 2007), with Brits currently making up 26%, up from 20% in 2011. The Spanish market is similar with interest from foreign buyers up 20% on the pre-crash peak in 2006 and once again the British are the biggest group at 14.8% of the total, up 8.8% in the first half of 2018.

A similar situation played out after the financial crisis of 2008. Once the economic situation had stabilised would be British buyers of 2nd homes on the Continent were reluctant to let their plans be put on hold indefinitely.

Euro mortgages can hedge your exchange rate exposure

Euro mortgage rates remain near historic lows for British buyers of European second homes and offer attractive protections against a future rise in interest rates. With the sterling to euro exchange rate likely to be volatile in the short-term securing Euro borrowing against your new property in France or Spain also offers an attractive currency hedge against financing the purchase using sterling denominated assets at unattractive exchange rates.

The situation has many moving parts but as British buyers of overseas second homes have shown many times in the past the fundamental reasons for taking the plunge can’t be delayed indefinitely by the vagaries of British or world politics or other reasons outside their control.

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