Interesting article from the Financial Times this weekend that focuses on the fact that interest rates are falling in Europe. The article includes comments from Home Hunts – Read the article here
In May, Andrew, who lives in the UK, borrowed €400,000 to buy a second home in the Alps for a little over €1.2mn (£1.01mn), from French bank Crédit Agricole, on a 15-year variable-rate mortgage. He could have funded the entire purchase with cash, or borrowed the money by increasing the mortgage on his main home in the UK.
But, with a good selection of products available from French banks, and a recent cut in the European Central Bank rate, several offered lower repayments than if he borrowed back home. Paying cash would have meant cashing in investments. “Interest rates are relatively high now, but in the long term the investment returns from my equity portfolio, after taxes and fees, should beat the cost of the mortgage,” he says.
Tim Swannie, who runs Home Hunts, a buying agent specialising in the Cote d’Azur, estimates typical discounts on sales in his area remain between 5 per cent and 10 per cent. “But falling interest rates are likely to bring buyers back to the market, and that could increase prices,” he adds.