Tahminae Madani of France Home Finance comments on :
This is the hot topic discussed daily with our investor clients. Making any kind of proclamation on the subject is about as dangerous as asking the “Magic 8 Ball” however we can share with you what the French markets and our bank partners are saying. Market investors have been speculating this summer that the European Central Bank will cut the euro base rate in Q1 2009 in order to kick start the slow economy and inspire investment again. Just last week ECB policymakers warned everyone not to hold their breath. Inflation is still too high and they made it clear that inflation reduction takes priority over economic growth. Our bank partners are saying the same thing – don’t expect a rate reduction before Q2 2009.
What does this mean to the French property investor? We like the short term fixed rate products – from 2 to 5 years. This allows you to limit risk in the short term and profit from an economic recovery in the mid team. You must always ask yourself however if you could be in financial trouble should the rates and thus your monthly payment be significantly higher at the end of your fixed rate term. If yes, think about how you would feel if that happened. If the thought makes your chest tighten and sends ice coursing through your veins, fix in for the duration. This option could cost you more overall but will save you peace of mind.
