26 September 2017 - French Mortgage News | International Mortgage News | Partners News |
Take advantage of French mortgage rates while they remain low!
French mortgage rates are at or very close to historic lows however a number of factors suggest that won’t remain the case for very much longer.
Another month has gone by without any official word on potential interest rate increases from the European Central Bank. The good news is that French mortgage rates therefore remain close to their historic lows.
With the economic indicators strengthening across the Eurozone, that situation is nonetheless expected to change soon. The general expectation is for the ECB to start reducing their quantitative easing programme over the coming months, and for interest rates and borrowing costs to rise accordingly. Anyone playing a waiting game regarding a French property purchase should therefore consider moving sooner rather than later, and to take advantage of low French mortgage rates while they are still available.
However, in the shorter term, the direction for French mortgage rates may not be so clear cut. In the last month, at least one French bank cut its shorter-term fixed mortgage rates for non-resident buyers.
It is also interesting to note that while shorter term fixed rates may have dropped a little, longer term fixed French mortgage rates have risen slightly. This move is perfectly in keeping with forecasts for interest rate rises in the medium to long term. The message to potential buyers in France is clear: be prepared. French banks are still happy to offer attractively low rates in the short term, but are already taking steps to account for the expected future rate increases.
Borrowers need to do the same. Fortunately, there are a variety of products on the French mortgage market that cater to the needs of individuals looking to protect themselves against the effects of the forthcoming rises in interest rates. An array of capped – and fixed-rate products is currently available to international buyers in France, as we discussed back in August.
Meanwhile, developments in current affairs are also having an impact on European borrowing costs. The strong performance of right-wing nationalist party AfD in the German elections is already sending ripples of uncertainty through the markets, which is likely to push up the cost of borrowing.
Suggestions that UK interest rates may rise earlier than the markets had pencilled in has also made Sterling volatile, recovering against the Euro following the battering that it took earlier in the summer.
Developments such as these will continue to dictate the short-term fortunes of interest rates and foreign exchange rates in Europe. However, all signs are pointing towards a rise in French borrowing costs is on the horizon.
Another interesting development regarding the timing of your mortgage is that over the past few months, we have seen an increasing number of vendors insisting that a mortgage approval be in place before the initial sales agreement (Compromis de Vente) is drawn up. They do not want to incur the costs of the required diagnostic tests without the knowledge that the buyers have their finance secured in the form of an agreement in principle. (Check out our article on the other benefits this can bring)The strict lending criteria and increasing emphasis on compliance has meant obtaining an approval is more difficult, and vendors are cautious due to the high number of sales that fall through owing to a mortgage refusal. Many buyers are finding this new request challenging as most banks simply won’t provide a formal approval until they have a draft of the Compromis. At best they will ask you to complete a form or take some basic details over the phone, but beware as this doesn’t constitute an approval and is not the reassurance the vendors are looking for. At IPF we will analyse all of your paperwork and fully underwrite your file before presenting it to the banks for a formal approval from the credit department, subject only to receiving the sales agreement and a valuation of the property. This provides the vendors and the borrowers with the peace of mind that the mortgage has been approved before anyone commits to the purchase. For more information on the French purchase process please check out our video channel.
So it seems that whilst French mortgage rates remain low and the vendors require more of a guarantee of finances it may make sense to move quickly if you are hoping to complete a French purchase, especially if you would like to be in by Christmas!
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