Is it right time to renegotiate mortgage on French home?
Falling interest rates prompt many homeowners to consider new deals
French lenders are often more hesitant over a remote farmhouse than a property in Paris, the Riviera, Bordeaux or Lyon.
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Mortgage interest rates have fallen over the past year to reach around 3.15% in January for a 20-year loan, prompting many owners to consider options for a better deal.
In France these consist of renegotiating your rate with your existing bank or transferring the loan to a bank with a more favourable rate so as to pay less monthly and/or reduce the repayment period.
“Our advice is that it is still too early in the cycle to contemplate a remortgage,” said Amaury de Monclin, of Bluesky Finance, a broker aimed at international clients.
“It is highly likely rates will continue coming down. It is more expensive to remortgage than in the UK, so you have to pick your timing. It could be different in six months. Fixed-rate mortgages are probably going to come down by a further 0.5% by the end of 2025.”
Political uncertainty
The recent political storms are another reason to wait, said Martin Heathcote, of brokers France Home Finance.
He said he recently advised a non-resident client, who a year ago took out a loan at 4.4%, to wait six months.
Read more: Weighing up costs of renting a home versus buying in France
“In 2024, loan volumes were really down so now certain banks will be more competitive because they need to get more clients, but it is not widespread yet.”
The costs, including brokers’ fees and bank frais de dossier mean it is not practical to change frequently.
How low will interest rates fall?
Many people jumped early in the last cycle, switching from a 4% to a 3% rate, then rates dropped to 1% in 2021.
“I don’t think we will get back down to 1% but rates will stabilise in the next year for residents between 2.5% to 3.5% [depending on borrower profile],” Mr Heathcote said.
He added: “The rough rule of thumb is there needs to be at least 1% difference from your current rate.” Government advice states you should look for at least 0.7-1%.
He added: “You need to look at what’s going on on a European and global basis and see if things are going to stabilise.”
French lenders often prefer high-earners who are buying property in a desirable location.
They will be more hesitant over a remote farmhouse than a property in Paris, the Riviera, Bordeaux or Lyon.
Having to renegotiate obligatory borrower’s insurance is also a consideration. For older people, or those with new medical conditions, the potential for a rise could cancel out any savings on the remortgage.
