French mortgage rates fall to record lows

Britons thinking about investing in the French property market may have seen the value of the UK pound fall to a five-year low against the euro as ‘hard Brexit’ fears persist, but many may still be tempted to take advantage of record low French mortgage rates that are continuing to creep downwards.

French mortgage fixed rates now start from below 2% for the first time which is “unprecedented for modern times”, according to John Busby at French Private Finance.

Rates for a 20-year repayment mortgage at 80% loan-to-value (LTV) have dropped to 1.85% fixed for the duration of the loan. This is available to the majority of non-residents buying property in France, with some localised rates going even lower.

"This means that, with a modest rental yield of 3-4%, international buyers can more than cover their interest payments and also pay down some of the capital too," said Busby.

He continued: "For British buyers, this dramatic drop in rates offsets the change in exchange rate with today's GBP/EUR rate only circa 5% below that of two years ago. Mortgage rates have dropped from 3.10% in September 2014 to 1.85% today. This means that the interest payable over a 20 year term has fallen by 42% in the same period."

On an average loan of €400,000 (£353,500) current buyers are saving just over €39,000 (£34,500) in interest payments over the course of a 20 year fixed rate mortgage on an 80% LTV, which is roughly €10,000 (£8,840) per every €100,000 (£88,400) borrowed. 

Busby continued: "People who were previously buying in cash are now using finance to manage the loss in currency values, hedging against future exchange rate movement."

Busby reports that on the whole, low borrowing rates are underpinning British demand for homes in France, especially in key locations like the Alps and Paris.

He added: "For buyers using USD, the French market is currently even more attractive, with the perfect combination of ultra low interest rates and a very favourable currency creating incredible buying conditions.

"Staple areas like Paris and the big towns along France's south coast are being targeted heavily by those buying with the dollar."