Many of our clients at 56Paris ask about French mortgage rates, and the current climate.
For the latest news and predictions for 2024, we caught up with a bilingual mortgage broker, a trusted partner of ours for many years.
Most importantly we ask the question – will we see better rates for buyers anytime soon?
Will French mortgage rates decrease in 2024?
It’s a topic we explored a year ago in our blog. But now, a full year on, we’re taking an updated look at French mortgage rates in 2024.
Last year, rates steadily climbed – reaching an average of 4-5%. This makes borrowing more difficult for many buyers, which in turn, impacts the Paris real estate market.
The increase was partially linked to efforts by the French government and European Union to combat inflation.
But now, things are expected to change.
While the exact reasons can be complex, economic forecasts anticipate a cooling inflation rate in Europe during 2024. This, in turn, could lead central banks to loosen their grip on interest rates, allowing lenders to offer more competitive mortgage deals.
Our expert broker, who works with international buyers in Paris, gives an update.
The latest from an expert mortgage broker
56Paris: What do interest rates look like for foreign buyers in Paris these days?
Broker: After a difficult 2023 that saw many banks pull out of the lending market, the start of 2024 is more promising – banks are showing more appetite to receive requests, and are starting to offer a slight drop in lending rates.
56Paris: Do you anticipate that these rates will decrease more soon?
Broker: The truth is – we are getting mixed messages. On one hand, the banks need to attract new clients to the residential market as 2023 was very slow.
This means they are being more aggressive.
But on the other hand, some banks are in a more ‘wait and see’ approach. So while they are accepting dossiers, they are not dropping their rates by much.
We expect interest rates for non-resident buyers to drop from the current average of 4-5% to a range of 3.5%-4% by the end of the year.
Comparing French rates to the US
56Paris: Are there caps placed on interest rates in France?
Broker: The French banks have an obligation to ensure their ‘all-in’ rate (called the TAEG, which is similar to an APR calculation) does not exceed a cap set by the French National Bank.
This taux d’usure (headline rate) was being reset monthly during 2023 but is now back to its usual quarterly update.
This is a sign the French National Bank considers the rates to have stabilized.
56Paris: How does the evolution of these rates compare to that in other countries such as the US?
Broker: The US tends to lead in both its increase and drop-in base rates, which impacts the mortgage lending rates.
However, rates in France still seem to be significantly better value than in the US. For example, a 15-year fixed rate in New York is almost 2% more than the equivalent in France now.
56Paris: What sort of term can foreign buyers expect to obtain on their mortgage here?
Broker: Loan terms generally go up to 25 years maximum, with most banks asking that the loans end before age 75.
56Paris: What percentage is currently required for the down payment?
Broker: We advise a 30% minimum down payment to give a wider choice of banks.
But we can find banks with lower down payment requirements for certain profiles, such as 20% for example.
Getting a local mortgage in France
56Paris: How long does the mortgage process generally take here?
Broker: It varies between banks, but on average the end-to-end process takes six to eight weeks.
56Paris: In addition to lower interest rates than in many other countries, are there fiscal advantages to purchasing with a mortgage in France?
Broker: The answer depends on your home country’s tax regulations. In some cases, you might be able to offset French mortgage interest costs on your home tax return. You need to speak to a broker direct, as it depends on your own tax situation.
56Paris: Should cash buyers consider purchasing with a loan? What about the Wealth Tax?
Broker: The Wealth Tax applies to property owners with net real estate assets exceeding €1.3 million, regardless of residency.
A mortgage can strategically keep your taxable asset value below this threshold, even if the property itself costs more.
56Paris: So at what interest rate and property value does a buyer break even on their mortgage here, in terms of the Wealth Tax?
Broker: There is a tipping point when the Wealth Tax savings outweigh the mortgage interest costs.
While using a mortgage solely to eliminate the wealth tax isn’t ideal (interest payments would likely exceed tax savings), a strategic approach can be beneficial.
For example, if you save 1% on wealth tax for a net asset value exceeding €2.57 million, it's like reducing your effective mortgage rate by 1%.
This could make a mortgage more attractive compared to keeping the money invested elsewhere.
A promising year to buy in Paris
With this prediction that French mortgage rates are expected to drop to a range of 3.5%-4% by the end of the year, it could be a promising time to buy in Paris.
Of course, it’s important to remember that these are predictions, and the actual path of interest rates can be influenced by unforeseen circumstances.
Additionally, your individual mortgage rate will depend on your specific circumstances such as loan amount, creditworthiness, and the lender you choose.
We can put you in touch with a local broker to offer you tailored advice. Or if you’d like to speak to our team of property experts about buying an apartment in Paris, contact us today.
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