Opportunities in the French mortgage market are ripe for the taking, says Clare Nessling, operations director at <a href="http://www.contifrance.co.uk">Conti</a>.
Overseas mortgages are already increasing in popularity with many brokers looking at this market as a potential source of generating additional income. And if you’ve not yet considered it, it’s a good time to do so. There are plenty of British buyers taking advantage of the property bargains available abroad, and no more so than in France.
Against the volatility of the British market, French property is seen as an increasingly solid investment option over the long term. It’s also affordable. At the time of writing, there are some rates on offer which are just above 2%. Some French lenders have tightened their lending criteria over recent months for non-residents, but mortgage availability is still generally very good. And while French property hasn’t been reduced to bargain basement prices, it generally remains well under UK averages, with plenty for your clients to choose from within a budget.
All of this may well explain why France is top of our ‘hot spots’ list for the third year running, with an impressive 39% share of mortgage enquiries received this year. Accessible, safe and familiar, it offers everything today’s buyer is looking for, including a defiantly dynamic property market.
As French homeowners buy houses to live in, and not primarily for investment, this adds considerable stability to property prices. The fact that the country doesn’t have a large number of high-risk borrowers is equally important as there haven’t been large numbers of forced sales at reduced prices. It hasn’t, therefore, seen a dramatic increase in supply and isn’t experiencing the price issues found elsewhere, particularly in Spain.
Existing French homeowners have, in fact, enjoyed solid capital growth since the late nineties, and despite the eurozone debt crisis, notaries throughout the country have been reporting price increases in Paris, the Cote D’Azur and Bordeaux regions over the last 12 months, according to recent reports.
<strong>Arranging finance</strong>
It’s important that your client obtains an approval in principle (AIP) which will tell them how much they can borrow and what price range they can realistically consider when conducting their property search. It will prove that they’re a serious buyer and they’ll be better placed to negotiate price.
If they’re planning to rent their property out, the rental income will be in euros, so it would make sense to take out a euro mortgage, as the rent received can be held in a French bank account to service the monthly mortgage payments, thus avoiding potential fluctuations in currency.
And here’s an interesting point – due to current exchange rates, a mortgage could even be a good idea for clients who think they don’t need one. Their immediate exposure to currency fluctuations is much lower than if they’re paying by cash, as they’ll only have to exchange the money for their deposit and fees for now. If they’re lucky enough to be a cash buyer, it may be appropriate to arrange a mortgage for them until sterling gains strength, at which point they can pay it back, and ultimately reduce the price they pay for the property.
One of the biggest advantages of taking out an overseas mortgage is that the lender, similar to those in the UK, will do its own checks on the property, ensuring that a proper legal title exists, that the property is registered in your client’s name and that a valuation of the property takes place. Banks will also check other issues such as planning permissions and building licences.
<strong>Rental opportunities</strong>
There’s been an increase in the number of overseas property owners renting out their homes to holiday makers recently, primarily as a new source of revenue. France is no exception, as the French tend to holiday within their own country, especially when times are tough. This can be a great way for your client to help finance their second home, especially if the rental income is in euros (and they have a euro mortgage) as they won’t have to worry about exchanging currency to make their monthly repayments.
