View more on these topics

Brits opt for French mortgages, says Assetz

People buying holiday homes in France are increasingly taking out French mortgages rather than buying with cash, says Assetz Finance.

Traditionally, the majority of British purchasers of French holiday homes to use personally have purchased their property outright, without any loans, using savings, inheritance or equity release on their UK property to finance the purchase.

Investors buying buy-to-let apartments or French leaseback properties would rarely consider financing their purchase in this way, intending instead to maximise their returns through the use of bank gearing and a minimal 15-20% deposit.

However, over the last 12 months, Assetz Finance has noted a rise in the number of British holiday home buyers opting for a French mortgage, from approximately 33% in 2005 to 50% in 2006, as people begin to recognise that they are both readily available and easy to use as a viable method of finance.

Katy Hepworth, overseas mortgage manager at Assetz Finance, says: “In the past French mortgages were less widely available and were renowned for being difficult to secure, meaning most holiday home buyers did not even consider using them and instead struggled to finance a cash purchase from the UK.

“This is no longer the case, however, and a considerable number of British purchasers in France are starting to take advantage of French mortgages which are consistently 1% – 1.5% cheaper than in the UK.”

The Euribor base rates used by French lenders range from 3.3% – 3.8%, whereas the Bank of England base rate is currently at 5.0%.

Therefore it is cheaper to borrow money in France to buy a property, than to release equity from a UK home.

A large number of holiday home buyers in France intend to rent the property out for a number of weeks every year.

By securing a Euro mortgage that is paid via Euro rental income, if the value of sterling gains against the Euro, only the small amount of equity injected into the purchase (normally 20% – 30%) would lose value in currency terms.

However, if the property had been purchased in sterling without a French mortgage, the full purchase price would lose value.

From a tax perspective, mortgage interest can be deducted from any French income tax liability if the property is making rental income, presenting another advantage of using a loan to finance a French property purchase.

Furthermore, any outstanding mortgage can be deducted from any French wealth tax liability calculation.

Hepworth adds: “In the past British people buying holiday homes in France have missed out on low interest rates, tax and currency advantages, often because they are daunted by the language barrier.

“However, buying with French finance is now a path so well-trodden by investors, that a considerable number of holiday home owners are now following suit and taking advantage of overseas mortgages.”


B2L repossession rise claims wide of mark, says ARLA

Reports that buy-to-let repossessions are on rise are “irresponsibly” wide of the mark says the Association of Residential Letting Agents.ARLA says that industry data not only confirms that buy-to-let mortgages have lower arrears than mortgages generally, but that there are also fewer buy-to-let repossessions too.It says that its own research consistently indicates that buy-to-let investors […]

CNLIS warns coal mines may cause subsidence in half UK homes

Council for National Land Information Service has revealed almost half of the homes in Great Britain lie within former and current coal mining areas where there is a potential risk of subsidence.The legacy of disused mining shafts and abandoned shallow underground workings can cause subsidence and fractures above and below the surface many years after […]

Transparency key issue, not commission says FP Advance

Transparency is the issue rather than commission, says FP Advance, provider of transition planning services to UK adviser firms. This reaction follows the Financial Services Authority’s announcement that its retail distribution review would look at the impact commission really has on the efficiency of the market, and the possible alternative structures.Despite concerns within the industry, […]

Golf perk for secured business

Access Broker Services has launched an incentive scheme for intermediaries who introduce secured loan business. The prize includes flights, transfers, accommodation and entrance tickets to the 2007 Masters golf tournament in Augusta, US.

Keep calm and carry on?

We British are known for our stiff upper lip and just getting on with things. It’s part of our quirky cultural behaviour – like forming orderly queues, or saying sorry when it’s not our fault. Many of us just aren’t that great at talking about what’s bothering us. But if someone feels that the stresses […]


News and expert analysis straight to your inbox

Sign up