France


French banks introduce mortgage lending rules for expats

by Ray Clancy on July 29, 2015

Expats looking to buy a home in France are facing tougher lending rules from some banks and even being required to have up to two years’ worth of mortgage payments in a separate account.

An increased demand for mortgages due to historically low mortgage rates rising in France has led to a reduced credit supply, according to experts.

Expats in France are facing new, tougher rules around securing a mortgage

There are also staffing problems in some banks who were not prepared for a sudden increase in mortgage applications, according to 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,’ he said.

Some lenders have responded to this problem by temporarily refusing to accept any new applications at all, while others are no longer willing to lend against the property alone, hence the demand for money in a separate account.

The requirement to have between 12 and 24 months of mortgage payments in an account, comes on top of the expectation for clients to have life insurance, home insurance and to maintain a good level of savings. These banks making these demands include big names such as Societe Generale and Credit Agricole.

It means that those seeking mortgages need to shop around, which can be a complicated business. ‘Whilst the fees and outlay for obtaining these loans may be costlier, there is a tradeoff, with lower rates offered as a result,’ Busby explained.

His firm is always looking for good deals and says it is possible to still get a mortgage at 2.2% over 20 years at 60% LTV, with 12 months payments in a savings account and a fee of 1%.

The restrictions come at a time when more British people, including expats in France and those living in the Middle East looking for a holiday home, are buying more properties in the country.

‘In rural locations prices are still below the peak and property in Paris is more attainable than in, say, London or New York,’ Busby pointed out.

The strength of sterling against the euro is adding to the attraction for British buyers who are getting 13% more euros to the pound than a year ago.

‘Many of the large resident lenders are no longer willing to undertake standalone lending, loans secured solely on property or le credit-sec as it is known,’ Busby explained, adding that the best deals are often only available through a broker.

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