Lana Marrash of France Home Finance comments on :
Last week, interest rate cuts were everywhere to be seen, with the European Central Bank (ECB) reducing their base rate by 0.5% to 3.25%, representing the lowest level since October 2006, and the UK slashing their base rate by a whopping 1.5%. Since the Eurozone inflation rate has fallen due to lower oil prices, with some economists forecasting that the annual rate will drop from it’s current rate of 3.2% to 1% by the middle of 2009, the ECB has changed tactics away from fighting inflation to focus on stabilising the economy, which means that it cannot rule out a further reduction in interest rates. Together with the determination of the new US administration-elect to tackle the economic crisis “head-on”, this represents good news for everyone.
The Euribor (Euro Interbank Offered Rate) is the benchmark rate of the large euro money market, sponsored by the European Banking Federation, and is the rate at which euro interbank term deposits within the euro zone are offered by one prime bank to another prime bank. Variable rate mortgages in France are usually based on the Euribor index, most commonly the 3 or 12 month index (plus a margin). As an example, using the graph below, the trend of the Euribor 3 month index has been historically very favourable to foreign investors borrowing to buy property in France.
Despite a sharp hike in the index in the past couple of months, due to the credit crisis, the Euribor is now falling dramatically thanks to the action taken by governments and Central Banks to ease the credit flows. From a high of 5.39% on the 8th of October, the Euribor 3 month index now stands at around 4.28%. This is very good news for people hoping to borrow for property purchases in France.
Cuts in the ECB base rate are now beginning to filter through to the mortgage banks, and we are beginning to see some of our bank partners rethinking their non-resident interest rate offering, be they fixed or variable.
Call now to check out the latest interest rate offers for your property purchase in France, and to get a free quotation.
