Following the European Central Bank’s (ECB) decision this month to cut the Euro Base Rate by 0.5% to 1.50%, mortgage rates of below 3% are now on offer from some banks in France. Just four months ago, Euribor, the ECB’s reference rate stood at over 4%, meaning many mortgages would have been priced at well over 6%, so the fall in mortgage costs in Europe has been just as dramatic as in the UK.
Tim Harvey, managing director of UK regulated overseas mortgage specialists Offshoreonline.org comments, “ In the UK, we have seen new loan interest rates dropping to under 4%, but in France, the position is even more dramatic. Mortgages are again at levels of around 2.8% to 3.2%. Interestingly, the French property market has not suffered to the same degree as in the UK. Whilst there has been some movement, many of the high quality areas such as Nice and Paris have basically kept their value.”
Data on house price movements in France is published by the State regulated Notaries, as all property sales have to be conducted using a “Notaire”. The figures for the Paris region are indicative of the differing French and UK markets: Over the last quarter, prices rose by an average of 0.7%, whilst over 12 month, the rise was 4.4%. Over 5 years, values have increased by over two thirds.
The ability of the French property market to hold its value is due partly to lending policies of the banks. Tim Harvey continues, “Banks in France will always ask for a 20% deposit, although with leaseback properties, buyers can often use their VAT refund, so the loan is virtually 100%. However, lenders will always look closely at affordability and the concepts of loans of greater than 100% or self certification mortgages are both unheard of.”
Whilst this fall in mortgage costs will come as a relief to many homeowners, savers will not have greeted the news with the same level of enthusiasm, and many are now starting to look at alternative lower risk investments such as Leasebacks.
According to the UK portal www.Frenchleasebacks.co.uk, the volume of enquiries they have received has risen since the end of November, despite the falling value of the pound. Guy Stephenson, a spokesman for Frenchleasebacks.co.uk explains, “Property buyers looking for an income stream know that indexed returns of up to 6% are available in France at the moment from leasebacks. Leasebacks differ from classic buy to let purchases in that the rental is guaranteed, as is the supply of tenants, so buyers do not need to worry about funding a euro mortgage, providing the loan is geared correctly.”
Leaseback purchases offer buyers in France a novel way of owning and managing property – with rental yields and tenants guaranteed and most having the option of personal usage, they are both a holiday home and an investment. Average rental yields are in the range of 4.5% to 6.0% net in some ski locations and so with mortgages available at rates of around 3%, investments can show a positive cash flow from the start. Moreover, rental yields and capital values are usually indexed, providing useful protection against inflation.
With low mortgage rates, a more stable property market than the UK and established alternative savings schemes such as leasebacks, France looks well placed to weather the current economic turmoil, both from as saver’s and borrower’s perspective.
For further press information:
Jenny Duffy 020 8333 9125
Note to Editors
Offshoreonline.ORG is a UK regulated specialist expatriate broker offering advice on French, Italian, Spanish and UK mortgages and pensions and savings for UK expatriates.
Offshoreonline .org pioneered the concept of the discount broker in the expatriate market when it started offering no fee deals on many popular offshore savings funds in 1998.
Overall, the company aims to bring high quality UK regulated advice and service to UK expatriates worldwide in the areas of pensions, mortgages and life cover. The company is UK regulated by the FSA for investment business, giving offshore customers the reassurance that they are dealing with a reputable organisation.