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Two new trends in the French property market Print E-mail
Tuesday, 07 July 2015

Credit supply reduced due to increase in mortgage applications

The French mortgage market for non-residents is experiencing growth problems as the number of transactions increases following the interest rate rises of recent weeks, reports French Private Finance.

“This is partially due to staffing issues at some banks who were not prepared for the continued spike in applications," comments John Busby, Private Clients Director at French Private Finance. “The sheer rate of increases in lending is also becoming a concern for the credit risk mangers that want things to slow down. This may happen on its own, as they don’t have the staff to cope.”

Some lenders have responded to this problem by temporarily refusing to accept any new applications. “The worst case so far is a cessation of all new business until September,” adds busby. “Many of the large resident lenders are also no longer willing to undertake stand-alone lending or ‘le credit-sec’ as it is known amongst the banquiers.”

Tightening of application requirements creates market-beating opportunities for the best applicants

With increased lending frequency banks are asking clients to place between 12 & 24 months of mortgage payments in an account, which would represent 5-10% of the loan amount.

“This is on top of the expectation for clients to have life assurance, home insurance and to maintain a good level of savings", continues Busby. “Whilst the fees and outlay for obtaining these loans may be costlier, there is a trade off, with lower rates offered as a result.”

As an example, we can currently source a loan at 2.2% over 20 years at 60% LTV, with 12 months payments in a savings account and a fee of 1%. Compared to the 2.7% 20-year product (featured in the best buy table) this represents a saving on the total interest of almost €6k per €100k.“

“Another way of looking at it is that this annualised saving is essentially a return of 4.67% on the 12 month’s mortgage payments put on account, which would itself increase with compound interest over the 20 year term.”

Stand-alone (le credit-sec) lending is a loan or loans secured solely by on property.

(Source - French Private Finance Press Information)



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