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French banks more reluctant to offer property loans to overseas buyers

French loan specialists Athena Mortgages points out that there also seems to be behind a reduction in the available durations for interest only mortgages and an increase in the net assets required for a pure interest only loan from 120% of net assets to 150%.

‘If we widen the picture we can see that at least two other banks have closed their international branches, Societe Generale and UCB, compounding the trend for an overall increase in the reluctance to lend to international investors. Several banks have reduced the amounts they are willing to lend to borrowers from outside Europe, whilst one major lender has restricted their products to EU citizens only,’ said director John Busby.

Another area that French banks appear to be tightening up on is affordability and the ratio of lending to gross income. ‘Traditionally French lenders will only allow a maximum of 33% of the gross income of the borrower to be set aside for loans such as mortgages. However, lenders have started to change the goal posts, refusing borrowers who they feel do not have sufficient funds to live on even though they meet the 33% gross income requirement,’ he explained.

In addition, French banks have started adopting Basle III criteria, a new global regulatory standard on bank capital adequacy and liquidity, which stipulates that total outstanding loans should be no more than six times borrower income. ‘Serial investors with large buy to let portfolios and first time buyers, in particular, are the most vulnerable to the changes, as lenders appetite for risk recedes,’ added Busby.

Overseas investors are speaking out about the way French banks work. Helen, 47, an accountant from Kent, recently wrote to Athena having had a bad experience approaching a bank directly.

‘The main reason for not going with that bank is our previous experience with them and also the experience of a friend of mine here in France.  We both feel they ask more questions and require more information then is reasonable, they take a long time to reach a decision and then change the goal posts between offering a decision in principle and making the final offer,’ she said.

Busby said that unfortunately this kind of experience is not uncommon. The company advises buyers begin investigating mortgage options as early as possible in the buying process and get a decision in principle from a broker.

‘Ensure you qualify for life assurance and find out if you will require a medical. Ensure all paperwork for the loan application is as complete as possible prior to signing a Compromise de Vente. Once you are ready to purchase send the completed file to an independent broker who is aware of the criteria and can place the application quickly with the right bank to match your profile,’ Busby said.

‘Sign and return all documents as quickly as possible to keep the momentum going as the longer the file is in process, the more likely criteria can change or rates increase,’ he added.