We continue to be contacted daily by prospective British and International French property buyers to understand what their borrowing capacity is in France.
In short, the mortgage market has constricted slightly since the pandemic and ensuing lockdown, but brokers and lenders are keen to get back to ‘business as usual’ as soon as possible. Don’t worry, whilst the market is a bit tighter than it was six months ago, it hasn’t disappeared. There are still plenty of long-term, fixed rate mortgage products at around or under 2% APR.
The decision by the UK government to boost their own property market as lockdown eases, and the easing of travel restrictions within France are all encouraging signs for the French property market.
Many of our FrenchEntrée partners on the ground in France have reopened, are beginning to do physical viewings as well as the emerging virtual tours options. Indeed, many are starting to receive offers on properties for their domestic audience, which is great news for rebuilding the pipeline. After a few subdued months, it is great to see our partners firing on all cylinders again!
Since Monday 11th May, the official start date of the deconfinement, businesses and schools in France has begun to reopen. Although French banks were closed for face-to-face business, and certain services had stopped, there was still some work going on behind the scenes. Inevitably with staff shortages, and many French banks simply not set up for their staff to work from home, many services were stopped or slowed down considerably.
The good news is that as lockdown eases many French mortgage lenders are getting back on track, and new applications can be considered again. They are also beginning to deal with the hefty backlog of cases following a property market which has essentially been in stasis for 3 months.
Are new applications being treated differently?
As you’d expect following a global pandemic and the inevitable impact on the economy – both in the immediate and in the future – there have been some changes to eligibility and affordability criteria.
There’s no getting away from the fact that it will be a little bit more difficult to get a loan than it was 6 months ago, particularly if you are a ‘borderline’ case.
One of the advantages of using a service like FrenchEntrée, with our network or brokers and lenders, is that we can help you to understand the likelihood of your application being accepted, and we can help prioritise your case with our lenders and brokers. Many direct applications to French banks are simply being ignored or subject to massive delays – so whether you choose to contact us or a different broker, it is definitely worth having someone in your corner who is batting for you.
Every lender’s criteria and approach will be different, and brokers will do their best to understand the changes and relay them to us, so that we can help you to understand your options – and not waste your time if it looks like an application would be unsuccessful at this time.
All that being said, even with the restrictions, it is a positive sign that French banks are continuing to want to lend to non-residents, and hopefully we won’t see the same level of contraction of the market as we did after 2008. This crisis is a health crisis, not a credit crisis.
Eligibility and Affordability Criteria
It is crucial – more than ever – to understand how the majority of French lenders will review applications. This will give you your best short at getting a positive response to application, as well as ensuring you don’t waste your time.
Getting your financial house in order, if you have 6-12 months before you formally apply for a loan, is probably the best guidance. If you apply out of the blue, showing that you haven’t quite got your deposit together yet (“the money is coming in with my annual bonus”) , or that you live in your overdraft (“my daughter’s wedding was a bit more expensive than planned”), or that you are stacked with loans (“but don’t worry I’m going to pay them off soon”) you don’t stand a chance.
Can you demonstrate frugality? Can you show a French lender that you have a capacity and ability to save? Do you have a relatively decent safety net behind you? Do you have a monthly standing order to a savings account, for example?
French lenders will undoubtedly, in the short-to-medium term, be more cautious. They were pretty risk-averse to begin with, so you need to work within their parameters and make sure that you package and present your personal finances to give you best advantage. You might have heard rumours about the French love of bureaucracy. Spoiler alert: the rumours are true. French lenders will be forensic in their assessment of your personal and financial situation before they consider lending. So, if you haven’t already, get yourself in pole position by preparing your paperwork including bank, pensions and investment statements. Set up a monthly savings plan, reduce some of those outgoing credit payments and stop using the overdraft!
“Mortgage lending in France is still not a priority as the banks focus their resources on their business customers.
The banks are still operating at a reduced capacity as they adhere to the social distance protocols and employees continue to work remotely where there is the ability to do so. However, the banks are now starting to implement measures that will allow staff to return to the offices and branches in early June at which time we expect them to re-start the mortgage processing although initially at a slower pace than be pre-lockdown. It is anticipated, all being well that business as usual could return in September.
If you have any questions about the mortgage process or the likelihood of obtaining finance in France, please don’t hesitate to get in touch: [email protected].