French mortgage trends:Good news first...The good news this month is that it seems French President Nicolas Sarkozy has decided against setting a new tax on second homes in France. Reports suggest that he has had a change of heart after strong objections from the real estate community and question marks over the legality of such a move. Still, I expect he will gain some political points for proposing it and a few Gallic shrugs for dropping it, so overall he is probably up. This news will be a boon to many existing owners in France who do not make their properties available to rent, as well as to prospective buyers of second homes.
Now for the bad news. The rate rise is coming on July 7 when the European Central Bank is expected to increase the main index rate from 1.25% to 1.50% in spite of all the problems in Greece. French banks have been among the most exposed with Credit Agricole, BNP and Soc Gen - apparently holding the most private Greek debt - now under scrutiny. Coincidentally these banks have already made moves to reduce their mortgage lending to overseas investors with Credit Agricole and BNP withdrawing 100% finance for leasebacks and Soc Gen having already closed its international platform. This trend for tightening criteria and attitude to risk is continuing with the withdrawal of a three-year interest only product by the Caisse d´Epargne.
The overall picture is still good for borrowing in France, however, and the argument for using a broker who deals with many banks and who understands all the crtieria is even stronger to save both time and money. The recent rate increases and tightening of banking criteria were always going to come after French interest rates reached historic lows last September. French finance is still available at 100% LTV for both classic purchases and investment property at rates which every British homeowner would opt for in a flash. At 100% LTV you have 4.35% capped at 5.35% for the entire 20 year duration or alternatively you can fix at 4.35% for 25 years at 80%. When you compare with the comparable UK 5 year fixed rates your eyes water as a UK home owner. The peace of mind and security offered by these sorts of mortgage products really are areas where the UK has something to learn.