French mortgage enquiries from British buyers are up by almost 30% this year at brokers International Private Finance.
Founder Fiona Watts says: “French banks have continued to assert that they will still be lending to UK buyers once we have left the EU but we believe many clients feel more comfortable knowing they have secured their finances before losing their EU citizenship.
Our savvy clients have realised that even if they could buy their French bolthole in cash, it makes more financial sense to keep their sterling liquid and borrow in euros (at extremely low rates – around 2% fixed for 20 years on a repayment basis). If the exchange rate recovers, they can then use their savings to repay their mortgage in full, saving thousands of pounds on the original purchase price.”
Independent financial adviser Tony Delvalle, of the Spectrum IFA Group, said the referendum result had separated the serious buyers from the browsers. “And with central banks unanimously cautious on the pace of quantitative tightening, buyers still have access to competitive and flexible mortgage finance,” he said.
Currency corner While the GBP/EUR exchange rate spent the first half of 2018 trading around €1.13/€1.15, July saw the pound take a battering as political tensions, Brexit uncertainty and disappointing UK data all took a toll, says Laura Parsons, of TORFX. “The pound fell to lows of €1.11 – down 4 cents from the year’s best levels. The decline meant anyone looking to purchase property in France would get fewer euros for their pounds than they would have at the start of the year, but it is possible that GBP/ EUR could bounce back before the end of 2018. Clarity on Brexit and positive progress in negotiations would be pound-supportive, while higher UK borrowing costs could also send sterling higher.”
Reaz Rahman, senior dealer at Currencies Direct, says buyers hoping to cushion themselves from currency fluctuations could consider using a forward contract to fix the current exchange rate for up to a year ahead. “While this means you won’t be able to benefit if the exchange rate strengthens, it does mean your funds will be protected if it suddenly falls,” he said.