23 August 2017 - French Mortgage News | International Mortgage News | Partners News |
What are the best options to protect ourselves when European and French mortgage rates start to rise?
French mortgage rates are close to historic lows. Borrowers who take out a French mortgage have many options that can safeguard against any future rise in French mortgage rates. Here we discuss those options in greater detail.
The outlook for the global economy is improving. Economic recovery in the Eurozone is gathering pace and the US economy is performing robustly despite Donald Trump’s unconventional approach to the presidency. Only the UK, through Brexit induced uncertainty, seems to be stuttering.
The foreign exchange markets have responded to this economic upswing with the Euro strengthening against both Sterling and the US $. However this now means it is more expensive in Sterling and US $ terms to purchase a property in France.
Speculation is mounting about when the ECB will reduce their quantitative easing programme and start raising interest rates and, importantly for the sterling/euro exchange rate, whether this will be before the same process starts in the UK.
The good news is that if you are planning a French property purchase, financed in part with a French mortgage secured against the property, there are a number of features that will protect you against any future rises.
- Protection should French mortgage rates rise: There are two main types of French mortgages that provide protection against French mortgages rate increases: Capped and Fixed rate products. Capped rate French mortgages are typically capped at 1.00 – 1.50% above the starting rate for a period of 7 – 13 years. During that time, the interest rate payable can rise no further than this cap. Long term fixed rate French mortgages are very popular in the domestic market with the possibility to fix for 10, 15, 20 or 25 years!
- Built in security: When French mortgage rates do rise, French lenders will normally extend the term of the French mortgage before your monthly repayments start to rise. This is seen as preferable as it allows borrowers to budget for the monthly cost of their French mortgage.
- What if I want to repay the French mortgage early? – Fixed rate French mortgages will typically have early redemption penalties which are normally equal to six months interest with a maximum of 3% of the outstanding balance i.e. on a loan amount of €250k and a rate of 2.15% the penalty would be €2,688. Crucially, French mortgage rates being low means that any redemption penalties are also reduced! This is particularly important for cash buyers who subsequently decide to part-finance the French purchase with a French mortgage to reduce the sterling cost and may therefore want to repay the facility early. For more information on how this works click here.
Our website has a host of tools and information available to guide you through the French mortgage process. These include;
- IPF’s French mortgage video channel
- The latest French mortgage rates
- A range of French mortgage guides
To talk through your plans, call the team today on +44 (0)207 484 4600 or complete our online quotation request form here.
Found a property? Request a quote now or call +44 (0)207 484 4600