Here are two figures for you. When I purchased my first French property in 2002, I managed to scrape a 70% mortgage (of €60,000) with my father acting as guarantor. When I purchased my second French property in 2006 I was showered with a 100% mortgage (of €280,000) with few questions asked. Interesting.
And good luck to anyone who tried to apply for a mortgage in the dark days of 2010. Although in 2014 the market has changed once again for the better, if my ongoing mortgage application is anything to go by.
Why the fluctuations? Let me give you the back story. Historically, French banks were tighter than a tenor’s trousers. French society dictated that buying property on credit was bad, while renting for your entire life was good.
Then came the Euro. And with it the biggest shake-up in French banking history. French banks could borrow money from Dutch banks that had financed Greek banks that had lent money to Belgian banks. This allegedly virtuous circle made credit freely available.
Historically high interest rates also crumbled. In France they were slashed from around a pre-Euro 7% to 3%. (In Eurozone newbie Greece they tumbled from around 16% to 3%, so no wonder people went credit crazy). Suddenly obtaining a mortgage seemed easy after all. Banks could profit by lending more and more.
One memorable example illustrates this era of heady credit. My estate agent colleagues and I were taken to a nightclub in Nice by a leading French bank. Cocktails were ordered. Canapés did the rounds. Our banking colleagues had orders from on high to raise their branch’s mortgage lending to €98m per year. And that was just one tiny division of one of the nation’s largest banks. Add all of them together and we’re talking billions.
And now? Things have changed, for the better. Regulation has stopped the banks acting like casinos (remember Jérôme Kerviel’s €5bn snafu at Société Générale?) Yet interest rates are at their lowest rates since 1945 in order to boost the Eurozone’s recovery.
As of February 2014, some 20-year variable mortgages start from just 2.5%. The best rates for fixed 15-30 year mortgages hover around 3.5%. For French residents 100% mortgages are possible, with 85% (including renovation costs) for foreign buyers as standard.
And my current mortgage application? It’s space age. My documents were sent by DropBox. My initial consultation was done by Skype. I’m applying with BNP Paribas through financial advisory and mortgage brokers Spectrum IFA. All I need now is €100,000 of easy money and I’m good to go.
Tristan was the director of a Riviera real estate agency until 2007.