| Mortgage Rates in France – The EURIBOR Rate |
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The majority of French mortgage products are based on a variable interest rate, calculated in the same way that UK lenders calculate tracker mortgages.
The interest rate will be calculated by adding a fixed margin to the base rate (the EURIBOR) used by the lender. The lender has a choice of EURIBOR base rates that they can use and they are all linked to the European Central Bank’s rate. EURIBOR stands for the Euro Inter Bank Offered Rate.
This is the rate at which European banks can borrow from each other for a set time period, 3, 6 or 12 months for example.
Most French lenders choose to use the EURIBOR 1 month index, the EURIBOR 3 month index or the EURIBOR 12 month. Typically the EURIBOR 1 month index is the lowest base rate, the EURIBOR 3 month is a mid range base rate and the EURIBOR 12 month is the most expensive base rate.
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For example over the last 8 years, since the Euro was introduced and the EURIBOR became the base rate for all Eurozone countries, the average EURIBOR 1 month index has been 3.18% whereas the average EURIBOR 12 month index has been 3.4%.
THE ADVANTAGES OF THE EURIBOR RATE
The advantage of securing a mortgage on a variable rate linked to the EURIBOR is that your French lender cannot keep your payments high if general money markets fall in Europe - the bank can only charge their set margin above the current level of the EURIBOR.
Below is a table which shows the average EURIBOR rate each year since its use began in 2000. This clearly shows that the EURIBOR rates tend to move between 2 and 4.5%. The average EURIBOR rate over the last 8 years has been between 3.18% (for the 1 Month Index) and 3.4% (for the 12 Month Index).
This table clearly indicates the low base rates used in Europe.
MAKING THE MOST OF LOW EURIBOR RATES
If you own property in France and do not have a mortgage currently secured on this property, you may wish to consider arranging a mortgage based on the EURIBOR rate in order to repay debts in the UK that are based on higher rates of interest. Equally, you may wish to consider raising a mortgage on your French based property rather than your UK properties for other purposes such as further investment or renovation work. Please consult our Re-mortgage and equity release mortgage pages for more information on this.
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To speak with a member of the Assetz Finance team
please call 0845 400 8000
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