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Holiday home Brits opt for French finance

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British nationals investing in France are increasingly taking out French mortgages rather than buying with cash, according to new research.

Over the last year, Assetz Finance has recorded a rise in the number of British holiday home buyers opting for a French mortgage jump from a third in 2005 to approximately half this year, as investors begin to recognise that buying a foreign mortgage in a viable and easy way of financing that dream home.

Historically, British investors bought French homes outright, funding their acquisitions with savings, inheritance or equity release on their UK property. However, financially savvy buy-to-let investors have generally bought houses and leaseback properties using loans, maximising their returns through bank gearing and putting down a minimal deposit of up to fifth of the market value.

Katy Hepworth, Overseas Mortgage Manager at Assetz Finance, said that the myth of French finance being difficult to secure "is no longer the case".

She advised: "A considerable number of British purchasers in France are starting to take advantage of French mortgages which are consistently one to 1.5 per cent cheaper than in the UK."

Currently, French interest rate range from 3.3 to 3.8 per cent; considerably lower than the base rate in the UK of five per cent, the highest level for five years. Therefore, mortgages in France are not only often easier to secure and appropriate to the local market but they are also cheaper than those in the UK.

Ms Hepworth continued: "In the past British people buying holiday homes in France have missed out on low interest rates, tax and currency advantages, often because they are daunted by the language barrier.

However, buying with French finance is now a path so well-trodden by investors, that a considerable number of holiday home owners are now following suit and taking advantage of overseas mortgages."

A major advantage of using French financial services is in the exchange rate: if investors buy their property with sterling, then the full purchase price would lose value if the pound rises against the euro.

On the contrary, if the buyer is paying for their mortgage with their rental income (paid in euros) the only the small amount of equity injected into the purchase, usually 20 to 30 per cent, would lose value.

Therefore in spite of historic prejudices against the quality of French finance, borrowing money from abroad can often be the safest option when buying property overseas.

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