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The Slow Rise in French Mortgage Rates

Tuesday 04 August 2015

There are signs mortgage interest rates are starting to rise in France, despite a recent fall in average rates.

Last month the average mortage rate fell to 1.99% compared to 2.01% the previous month.

However, as leading experts l’Observatoire Crédit Logement/CSA pointed out, the average decline is mainly due to an increase in loans for works of renovation, where rates fell back.

For the purchase of an an existing property the average rate rose by 2 basis points to 2.02 %, although not all lenders increased their rates.

In addition, the Observatoire stated the other reason rates fell was equally because the loans were of shorter duration in the period.

That still means rates are historically low at 1.90% for 15 years for a fixed rate loan, 2.17% for 20 years and 2.54% on 25 years. Depending on the characteristics of the applicant and the level of their deposit, loans are available even below these rates, particularly for a variable rate loan.

All borrowers are required to take out invalidity/death insurance to cover the mortgage, which costs around 0.5% of the loan amount, and which needs to be factored into the total cost.

Rates are expected to rise in the coming months, but with financial fundamentals still more attractive than they were at the beginning of the year, the Observatoire considers that there is no reason to be concerned about any significant rise in rates.

They consider rates will rise very progressively, with an increase to 2.12% by the end of December, to 2.23% by the end of June 2016, reaching 2.40% by the end of the year. That forecast is made on the assumption that there will be a gradual easing of the Greek crisis, a development that cannot be taken for granted.

With widespread reports of rates likely to increase there was a rise in the number of mortgage enquiries in the month. Around 40% of these enquiries were by existing mortgagees seeking to take advantage of lower rates by renegotiating their existing loan.

Although many international buyers consider they may not be eligible for a loan of long duration in France due to their mature years, this is far from the truth. Lenders are willing to grant loans to seniors, often up to 20 years duration, but certainly without difficulty up to 15 years duration.

If you are interested in seeking a mortgage in France, you can visit French Property Mortgages to explore the options available to you.

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