The French Mortgage Blog
Monday, 22 March 2010
Life assurance for French mortgages set to change
The French mortgage market has received many plaudits recently as it is in relatively good shape compared to its ailing Anglo Saxon cousin. Once you look on the inside of the institutions and procedures of many of the banks you might be forgiven for thinking that you had been transported back to the mid 1980s. In recent times, competition has increased for mortgages in France for international buyers and in the past couple of years the first mass market interest only loans were introduced. Now further reform is on the cards as the French economic and finance minister, Christine Lagarde, continues her improvements to the regulatory landscape especially hidden bank charges.
Many international buyers of French property are surprised to find that life assurance is compulsory for all French mortgages. Even more surprising, is that the majority of French banks only allow applicants to use the life assurance recommended by the bank. However, this seems set to change with the Lagarde Reform which is currently going through the French legislative process. The main provision of this project lies in Article 17 which amends Article L. 312-9 of the Consumer Code as follows: "A lender may not refuse to secure another loan insurance contract when the contract has a level of security equivalent to the insurance contract that offers". Other amendments are also being proposed to strengthen consumer rights in this regard and the changes are expected to come into force on the 12th May 2010. This shake up should bring in more competition which is long overdue within the market.
The benefits of this reform will produce real cost savings over the life of the mortgage, with some insurance brokers saying that insurances costs pay go down by over 50 per cent. The minimum typical type of life assurance required for a mortgage in France is against death or total loss of mobility which generally costs €30 per month per €100,000 borrowed which for an average sized loan over 15 years would save over €5000. For more information or to sign up to our newsletter please visit www.athenamortgages.com
Thursday, 3 December 2009
10 year low for EU Central Bank rates
Although the news today came as no surprise, it is interesting to see that the general consensus for the way in which the French mortgage market and French property market will evolve is currently going to plan. If we look across the water to the US figures released today from a survey by Freddie Mac, the giant US government owned mortgage syndication company, indicated that 30 year fixed rate mortgages are now at their lowest level for 10 years. The rates for these mortgages have been falling for the last 5 weeks and now stand 4.71% down from 4.78% just one week ago according to Reuters news agency. Variable French mortgage interest rates are very low starting at just 2.3% and with the rates for long term loans also decreasing, now standing at 4.5% for a 30 year fixed rate in France at 80% LTV, showing that the money from the economic stimulus packages is definitely filtering into the global economy with many institutions now ready to borrow huge sums and to lend this money on into a rising market over the next 20 years.
So what does this all mean for the outlook for the French property market? Well, it would seem that prices will inevitably start rising as the money from the quantitative easing finds its way into the hands of those who are capable of obtain a mortgage in France. The timing and scale of the increases depends on the speed at which the economy takes off again but certainly within 5 years the increases in French property prices would realistically seem to be substantial providing the period of unconfident growth we are entering only lasts for 3 years. The effects of inflation, energy prices, unemployment rates and of course confidence will all have their parts to play over the coming 12 months making this a very interesting time for both French property and French mortgage markets.
Here you’ll find news, comment and analysis on the French property market. You can also hear what we’ve been up to at Athena, and links to other sites we find interesting.
| Change language to: |  |
 |