Money column
Fiona Watts considers whether French mortgages are still an option for British buyers
Y
ou would have to have been living on another planet not to notice that the last
18 months have been pretty uncertain economically. This has had a massive impact on interest rates across the globe, and a knock-on eff ect on the availability of mortgage lending. The situation in France has been no diff erent and we saw a mass withdrawal of lending in September 2022, with the non-resident market hit most severely. The market is not back to pre-September 2022 levels, but it has made great strides and has signifi cantly improved. There are now plenty of mortgage options for those looking to buy in France. Criteria wise, we have seen
options open up to those wanting to buy in individual names as opposed to having to set up a French company structure, for self-employed borrowers and for US citizens and residents. These borrowers had been particularly impacted in the last 18 months. Loan to values have returned
to 85%, with borrowers able to secure an even higher LTV if they are prepared to place funds with a lender. Product wise, we have seen
a return of variable rates. Most interesting of which are the capped variable products, which allow borrowers to benefi t from falling interest rates as well as protect themselves against further increases. They also have the fl exibility to make early repayments or repay in full without penalty.
CHALLENGING LANDSCAPE Interest rates in France passed the 6% mark in 2023, and dropped across the board at the start of 2024. At the time of writing, rates are currently
from 4.02% for a 15-year capital repayment mortgage. Those concerned about locking in a long-term high rate will be pleased to know that refi nance products have also made a recent return to the market. The challenging landscape
meant that approximately 40% of French mortgage applications were refused last year (that is for the whole market not just non-residents) – compared to a fi gure of only 7% for UK mortgage applications. That’s quite a diff erence! These refusal levels have
led to heightened anxiety among all parties in the French property market, leaving sellers, agents and notaires wary of buyers who require a mortgage to fi nance their property purchase. The French buying process generally allows buyers to have two months after the initial sales contract has been signed and the property removed from the market, to obtain a mortgage. If not successful with the
mortgage application, the buyer will receive their deposit back and can withdraw from the sale. None of the parties involved want to wait two months to fi nd out a buyer can’t obtain a mortgage. This caution means that it is
more important than ever to put yourself in the best position as a buyer before making an off er on a property, otherwise there is a high chance you will simply lose out to a cash buyer. At IPF, we recommend that you do your homework fi rst so that you are sure you can qualify for a mortgage before putting in your off er. We are advising our clients
to obtain an agreement in principle (AIP) to prove to sellers and agents that you qualify for a mortgage and therefore minimising the chances of you withdrawing
84 FRENCH PROPERTY NEWS: May/June 2024 “There are now plenty
of mortgage options for those looking to buy a French property”
within that two-month period and the sale falling through. An AIP is fully underwritten
by the bank and provides all parties with the comfort that you have been approved for a French mortgage – subject to a valuation of the property. This puts you in a much stronger position. If you bear the tips in the boxout (right) in mind, you can ensure you won’t lose out to a cash buyer when you fi nd your dream property in France. Some good news for buyers is that the slowdown in the
property market due to the lack of lending options has meant there are some deals to be made with prices in some areas beginning to fall for the fi rst time since the pandemic. All the more reason to be in the best position to take advantage of these! ■
Fiona Watts is the Managing Director of International Private Finance Tel: 0207 4844600 internationalprivatefi nance. com
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