French mortgage market attractive for buyers going into 2013
|Friday, 21 December 2012|
Activity in the French mortgage market is picking up as many buyers get their mortgage applications in and approved at current ultra low rates which are expected to continue into 2013.
Mortgage specialist French Private Finance said that it has experienced increased interest as it is an historically good time to buy in the country.
‘This week alone we have sent quotes out over €15 million of new purchases in the Alps at all different price points with viewings all confirmed. Now certainly is a good time to be buying with French mortgage rates at their all time historic lows and with loan to values of 80% of the purchase price and effective interest rates from 2.4% over 25 years,’ said director John Busby.
Looking forward to 2013 he said it certainly seems as though the low interest rates will remain. He added that French banks continue to be interested in lending to non-residents.
‘We are not anticipating any further changes to underwriting criteria. There have been some positive noises about Europe recently with consumer confidence increasing so we can’t be sure these low mortgage rates will be around forever,’ said Busby.
He also pointed out however, that the amount of mortgages granted by French banks continued to register a strong decline in the third quarter of 2012 with a drop of 24.3% compared to the same period in 2011.
But it does depend on the market and the lender. For example, in October, the Banque de France recorded a rebound of 21% over a month in the number of completed French mortgages, but reported a 34% drop in total over 12 months.
‘The beginning of the year recorded a sharp drop in demand but since September, in a context where borrowing has never been so inexpensive, demand has increased again thanks, in part, to an increase in borrowers re-mortgaging,’ explained Busby.
In December, 49% of banks have lowered their fixed rates whereas 51% have left them at the same level. No increase from any bank has been recorded. The average rate also decreased slightly to 3.55% over 20 years against 3.58% in November and 4.31% in January.
In 2012, rates have decreased on average by 0.50% to 0.85%. ‘This is a historic decline that nobody expected in early 2012. One explanation can be found in dramatic decline in the TEC 10 index, the rate at which the French government can borrow for 10 years, which now stands at 1.99% in December,’ said Busby.
‘The other factor is that banks faced with declining demand are offering favourable discounts to attract customers. This December, borrowing €200,000 over 20 years costs on average €80 less per month than in January. This leads to an overall savings of nearly €20,000 over the loan duration,’ he added.
He also pointed out that the trend for individuals seeking to take a mortgage is to borrow less capital on a shorter duration. The statistics also indicate that individuals are opting for the shorter loan terms to benefit from the favourable conditions.
‘Reports suggest that banks have not tightened their mortgage affordability requirements recently. Instead, lenders are more diligent and careful about the financial situation of applicants, which all would agree is justified in the present context,’ Busby continued.
‘On the other hand, while looking for the best borrowers, some even have softened their requirements, offering special deals for the younger borrowers or lowering the minimum income levels to make it easier to get a loan. In this context, overseas buyers can easily apply for a French mortgage and take advantage to invest in a second home or a buy to let property in France,’ he concluded.
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