20 March 2020 - French Mortgage News | International Mortgage News | Partners News |
Keeping the French Property dream alive with a French mortgage – despite COVID19 and a French lockdown
Through the prism of these uncertain social and economic times, it can seem flippant to continue to talk about the more discretionary life choices and purchases – and purchasing a second home overseas would no doubt fall into that category. However, it is important to also remain positive and continue to dream and plan for when the global restrictions on travel are lifted. Whilst inquiries have certainly slowed down, we have been pleasantly surprised to see many clients are continuing to explore their options and research their property purchase, and an overwhelming number of those that have already started the process are intending to continue.
And yes, we haven’t seen a situation like the coronavirus before, but at IPF we have been successfully helping clients purchase in France through many turbulent economic periods, including the credit crunch, sovereign debt crisis and Brexit (remember that?!). This is largely because, in times of economic uncertainty, the dream of owning a property in France does not disappear and purchasing with a French mortgage, rather than in cash, can add in layers of protection and save you money.
We’ve written previously about the different ways purchasing with a French mortgage can save you time and money, but it’s worth highlighting some of the features of a French mortgage that are particularly pertinent in this current climate of an unfavourable and volatile exchange rate and a drop in share prices
Very low French mortgage rates mitigate the poor exchange rate
For any of you who had been looking at property in France last month, you would have been working with an exchange rate of around £1/€1.20, making a €400k slope-side apartment about £333k. Exactly a month later, the Euro exchange rate against the Pound fell to it’s lowest point in nearly a decade (£1/€1.05) and is currently sat around £1/€1.10 – making that €400k apartment now the equivalent of £363k. In a blink of an eye, it’s added £30k to the sterling purchase price. However, the exchange only materially affects you if you are buying 100% in cash. By borrowing in Euros at an LTV of 85% (the max available for a dry loan), you would only need to convert 15% (€60k) for your personal contribution. €60k at €1.20 = £50k and at €1.10 = £54.5k. So just an increase of £4.5k, which is a lot more palatable.
You do, of course, need to consider that you would be paying interest on the French mortgage, but French mortgage rates continue to hold at historic lows, between 1 – 2.5% depending on the product. They also come with very small early repayment charges, so you can pay back the loan in full as and when the exchange rate recovers – again reducing the purchase price in sterling.
Long term fixed French mortgage rates give long term reassurance
If you are familiar with the UK mortgage market, you can often assume that the French mortgage products and rates will be similar – we are only across the Channel after all. One of the key differences between the UK mortgages and French mortgages is the ability to fix your mortgage interest rate for the duration of the loan – so up to 25 years! Knowing that the monthly payment for your French mortgage isn’t going to change for 25 years, (currently you can fix for 25 years from around 2%) gives you peace of mind for the long term. There are also fixed rates available on an interest only basis, as well as capped rates. Depending on the level of risk you are personally able to accept, there really is a great selection of French mortgage products available to you
Keeping faith in your investments and protecting the rainy-day fund
Aside from Bill Gates (how did he know?!), the vast majority of us did not see this coming. Many of us will have seen our hard-earned savings and investment lose value overnight. And really, can we ever be certain we won’t need to dip into our reserves in the medium -to-long term. Unlike the UK, there is no re-mortgage market in France – it is extremely costly (you must go back to the notaire) and only available in a very limited set of circumstances (and capital raising isn’t one of them). Therefore, if you buy in cash, your money is locked into that property until you sell it. Purchasing with a French mortgage however, still allows you to diversify your investments into property, but doesn’t force you to sell shares at a low point in the market whilst ensuring you have instant access to your cash reserves in the future.
French Banks are open, just not to the public
Obviously, France is on lockdown now with a skeleton staff keeping the essential functions (this includes the banks) operational. However, the majority of French lenders are no longer taking on any new direct applications – making it almost impossible for you to get any kind of idea as to what products you would be able to obtain, and no guarantee when your application would be processed once service returns to normal.
Here at IPF, we are still very much open for business – our team is well and, using the latest technology, able to work securely from home. We are also in daily contact with the French banks, who remain open to us. Due to the volume of business we complete with them, and the relationships we have built with the institutions over the past 12 years, our clients’ applications are, and will continue to be pushed, to the top of the pile.
With our in-depth knowledge of our all the lenders’ criteria we are able give you financial advice (we are FCA-regulated and ORIAS authorised), recommend the most suitable products and to pre-underwrite your application which not only speeds up its progress once we submit it, but gives you the confidence to negotiate with vendors and commit to a purchase.
We’ve talked about the benefits of using a French mortgage broker and how to select the best one in the past, and all these points are equally, if not more, valid during this period of uncertainty. Perhaps the key one is “prioritisation” – the backlog of applications is only going to get bigger, and by going direct to a bank you will undoubtedly be waiting months for a decision. Our files are always going to be at the top of the pile, so please do get in contact so we can make sure you can put that dream of owning a French home into reality sooner than all the rest!
Lastly, we hope that our website, newsletters and social posts can continue to be a source of inspiration and a welcome break from the news. And, as always, we are at the end of the phone, ready to chat through French mortgage options with you.
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