French Lenders See Activity Rise Due to Bargain Prices

French lenders are seeing an increase in activity due to fantastic buying conditions in France with prices in popular regions  attracting overseas buyers and French holiday home seekers.

British people are still keen on property in France and UK based lender French Private Finance has reported that May saw the single largest increase in applications since 2007.

‘Over the course of the month we received applications from people who have signed purchase agreements for over €20 million with a further €10 million in borrowers refinancing loans or releasing equity,’ said director John Busby.

‘The increase in applications can be attributed to the fantastic buying conditions in France. The mixture of ultra low rates combined soft property prices, especially at the top end of the market, means that there are bargains to be had,’ he added.

The firm believes that French fixed rate mortgage interest rates may be set to increase following sharp rises in the 10 year government borrowing index. The TEC 10 index, which gives an indication of how much it costs the French government to borrow money for 10 years, has increased by over 0.6%, in the past month.

The TEC 10 index crashed to its lowest ever level at the beginning of last month reaching 1.67% and producing the lowest ever fixed rates on the non-resident market. Over the course of the month the TEC 10 has been increasing and now stands at 2.37%.
 
‘If we maintain these levels for more than a few months, which it seems we might as there is talk of an end to the money printing by governments, the money borrowed when the TEC 10 was at its lowest ever level will run out and the increase will have to be passed on, which at current levels of activity may not be that long,’ explained Busby.

‘Although the drop to these low rates has not been enough to revive the real estate market, it does represent a real source of oxygen for consumers and a boost to purchasing power. Renegotiating your mortgage in France now seems like a necessity for a large number of borrowers who are not hesitating  to bite the bullet,’ he added.

He also pointed out that re-mortgaging is a boon to those borrowers who signed up for a mortgage few years ago when rates were higher, who can now also benefit of current low level rates.
 
‘People re-financing their mortgages can use the current French mortgage best buys for normal purchase as there is no premium placed on these types of products. As there are some costs involved in re-financing a loan it is important that the loan amount is more than €100,000 and the difference between the interest rates is 1%,’ said Busby.

‘On a 20 year loan someone who lowered their interest rate by 1% over 20 years on a €100,000 loan would save in the region of €13,000. The costs for the change would be 1% for the bank and 1.5% for the mortgage registration tax so approximately a €10,000 saving after costs per €100,000 borrowed,’ he added.