Market update
France has not escaped the rise of rates over the last few months. Yet these increases have not been to the level seen in countries like the UK. In France, as the rates were extremely low to begin with, the recent rise puts them back in the realm of normality. The Tec 10 index, which ultimately dictates how much the French government pays to borrow money over 10 years in France, fell during the summer 2019 to its lowest ever level of -0.5% and now stands at 2.76% after an increase in 2022.
Why is the rising of French mortgage rates a good thing?
Even though the rates are rising rapidly, they are reaching a level that was considered a normality before the all-time historic low level we witnessed for a couple of years. They are still quite low and more importantly fixed for the whole duration.
As you can see, rates have been extremely low (under 2,5%) in France for around half a decade. During this period we’ve seen a gradual constriction of the market, with fewer mortgage products on the market and even fewer banks offering non-resident mortgages at all.
Yet with such low mortgage rates in France, is anyone really surprised the market has ended here? As much as many consumers are programmed to loathe banking institutions (unless it favours or benefits them), if there is such little money in a market, is it a surprise that the products within that market have dwindled?
This summer we spoke about the Taux d’usure which is the maximum APRC that a bank can charge to a client. The taux d’usure is set up by the Banque de France and is calculated every 3 months. On October 1st, it has been calculated at 3.05%. That means that your mortgage (insurance and fees included) cannot cost you more than 3.05%.
The rising of this cap is a good thing, as much as it seems bad. At least it means there is more money within the market which will lead to new mortgage products. And whilst they’ll be at higher rates than the all-time lows we’ve seen over the last few years, at least there will be product available at all!
Mortgage rates update
Next year we expect the rate for a 20 year capital repayment mortgage to reach 4%. Despite the situation, we have a good number of options for our non resident clients, with an average deposit of 30% for EU residents or 50% for non EU residents with a rate around 2.80% – 2.90% fixed for 20 years.
Some banks are today offering rates above the taux d’usure mark (around 4.20% fixed for 20 years) if the purchase / lending is deemed commercial (through a SARL or SCI for example). It is not bad at all compared to what you can fix for in the USA or the UK at the moment. For British buyers it is a bit more complicated since Brexit, but for next year our UK mortgage team has a new bank that could finance our UK investors.
Credits French Private Finance in London.
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