Despite the outbreak of COVID-19 and a lockdown across France for several months (which is now beginning to ease as life adopts to a new normal) it has been important to remain positive, and use the time wisely to plan and prepare. As domestic travel within France is possible, and as international borders begin to open up, estate agents are busy again with viewings.
As lockdown has eased and plans get back on track, it will come as no surprise to our readers to learn that our enquiries for new French mortgages on purchases have increased over the last few weeks, and enquiries for remortgaging and equity release have remained steady. Of the enquiries we are seeing for new mortgages, the majority are at the very beginning of their search. Alongside looking at potential properties, Francophiles continue to want to explore their financial options, and be ready to be quick out of the gates when the market returns, which it inevitably will.
The coronavirus pandemic is unlike anything we have seen before, a ‘Black Swan’ event, and will have far-reaching, long-term implications on how we live and work. That said, at FrenchEntrée we have helped our clients through a number of difficult periods including the credit crunch in 2008 and the Brexit uncertainty, and we will continue to support our readers and clients through this crisis.
The dream of owning a slice of France will never be extinguished, no matter what the crisis, and the continued number of property and mortgage enquiries we have received over the last few weeks is a testament to that desire. Purchasing with a French mortgage, rather than cash, can provide a layer of protection against currency fluctuations and save you money in the long run.
It is certainly worth considering for property buyers who were going to disinvest to cover the deposit or even the full value of the purchase, but following the stock market crash and portfolios decimated, looking at a cheap, long-term loan in France allows them to realise the dream whilst the remaining investments can be left intact.
In these difficult times, it is worth highlighting some of the features of a French mortgage, in a world with a volatile exchange rate and dropping share prices.
Low French Mortgage Rates = Mitigation of Exchange Rate
If you compare £/€ exchange rates just a few weeks ago compared to now, and you were looking to buy a property at (for example) €400k, entirely in cash, you could be in a situation where that property costs you tens of thousands more. Unnecessarily.
If you borrowed in Euros at an LTV (loan-to-value) of 80% (the maximum a non-resident would likely be able to borrow), on the same property you’d only need to convert 20% as your contribution. Currency volatility on €80k is a lot less painful than on €400k.
On the subject of LTVs, although the example about is at 80%, we’re seeing LTVs for British/EU citizens at around 70%-75%, and US citizens around 60%-65%. The generosity of LTV has definitely been hit by a constriction on the market and nervousness on the part of the banks.
Of course, there will be interest to pay on a French mortgage, but as rates continue to hold at historic lows – between 1.5% and 2.8% depending on the product – it is a very attractive option.
Another advantage is that many products come with relatively small early repayment charges. This means you can repay the loan back in part or in full when the exchange rate recovers.
Incredible Long-term Fixed-rate Deals Give Reassurance and Control over Budget
One of the critical differences between the UK and the French mortgage market is the ability to fix a mortgage interest rate for the duration of the term. None of these special introductory rates which look too good to be true (and often are) before reverting to an expensive variable rate you can’t get out of unless you remortgage. In France you can fix rates for up to 25 years in some cases. Knowing that you can fix a loan for a quarter-of-a-century, with the monthly payment at 2% not increasing for the duration…what peace of mind.
Alistair Lockhart, Property Director at FrenchEntrée, comments:
“Is it as easy as it was 6 months ago for a non-resident to get a mortgage? No. Is it still definitely possible if you’re able to tick all the right boxes and demonstrate a sound financial profile? Yes, definitely. FrenchEntrée remains very much open for business, as do our partners. We are in daily contact with our French banking partners and brokers via telephone, email, Zoom and Whatsapp, and they remain open to us and happy to discuss new applications – whether that be for a new loan, remortgage or equity release. As always, despite the lockdown in France and elsewhere, we’re available!”