Why getting a mortgage in France is about to get more difficult

Why getting a mortgage in France is about to get more difficult
Photo: AFP
For most people wanting to enter the French property market - either for their main residence or a second home - a mortgage will be essential. But new rules means this might be about to get more difficult.

Two recent decisions have tightened up the rules and criteria for getting a mortgage in France.

In late January, France’s financial watchdog, the Haut Conseil de stabilité financière, tightened regulations on lending – notably on the sums that could be borrowed – in an attempt to calm down the country’s real estate market in the face of longer mortgage periods and generous lending options.

 

The Banque de France, meanwhile, has called on lenders to return to ‘good practices’.

“In 2020, in spite of the lockdowns, we had 5.4 percent growth in real estate credit, as in recent years,” Emmanuelle Assouan, Deputy Director General for Financial Stability, told Le Parisien.

“We have become the eurozone country where households are the most indebted. We have reached a critical threshold.”

Lending limits

Banque de France’s key strategy is to limit the amount the majority of mortgage-seekers are permitted to pay in repayments to a maximum of 35 percent of their net income, including “repayment of the borrowed capital and all interest and insurance charges” over a maximum mortgage period of 25 years.

Other loans are also taken into account when calculating a prospective borrower’s level of debt.  Anyone who already has loans that eat up more than 33 percent of their income will be refused.

READ ALSO The real cost of buying a house in France 

Other requirements

But the rules don’t stop there, stricter rules also mean that borrowers will be expected to be able to lay down a minimum 10 percent deposit on a property, Maëlle Bernier, a spokeswoman for price comparison site Meilleurtaux.com told the paper.

She added that this would likely mean in effect lenders would be more cautious about who they would lend to, saying: “Then, you would need to have a permanent contract and not be in a sector threatened by the health crisis.”

This is an important point in the current situation. Borrowers employed in tourism, aeronautics, catering or events – all sectors badly affected by the pandemic and subsequent lockdowns – could find it more difficult still to get a mortgage because of the precariousness of their employment.

READ ALSO Six things to think about before buying a house in France

Second home buyers

Brits who want to be buy second homes in France could be facing another Brexit-related headache, France-based mortgage broker Eddie Sammon explained to the Local earlier this year.

He said that one French bank had told him UK residents wishing to obtain a mortgage for a second home in France must satisfy the conditions to be classed as a high net-worth or high-income individual, unless they are purchasing a primary residence or a property which will be mostly rented out. UK citizens who are tax resident in France will not be affected.

READ ALSO How to calculate notaire fees when buying French property

“To be classed as a high net-worth or high-income individual, Britons will need to earn at least £150,000 per year or have £500,000 in net assets,” he said. “For couples, this is required for each borrower.

“The bank has stated that they have introduced this criteria ‘in order to comply with new regulatory requirements in force in the United Kingdom’.”


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