Conditions perfect for mortgage seekers in France

THE cost of credit is lower than ever and there has been a return to attractive variable rates. All the conditions are perfect now if you need a mortgage to finance your house in the Dordogne. 

Fixed rate loans go lower and lower.

Interest rates fell even lower last month. For loans over 20 years, the most common loan term, rates fell to 4.25% in late August. A 15 year mortgage, now has a rate of 4.10% or almost 1.25% down from the high reached in October 2008.

For many banks, the mortgage is back as a loss leader in attracting new customers. The good news is that the cost of credit is expected to fall further in September.

Brokers expect fixed rates to settle at 4% over 15 years and to 4.15% over 20 years. 

But there is speculation among analysts that the downward trend may not last.

The return of variable rate mortgages.

Before signing your loan, compare rates fixed to variable rates advises Empruntis who maintain that, on average, variable rate mortages are 1% lower than fixed rate products. 

To minimize risk, opt for a "capped" loan. In other words, a type of loan that doesn't soar when there is the slightest rise in interest rates by the European Central Bank.

So, for example, a rate capped at 1 will not increase by more than 1% while a rate capped at 2 will not exceed a 2% increase. 

For a loan capped at 1% over 20 years, average rates are currently 3.10%. And if it is capped at 2%, expects an average rate of 3%.

But be careful. Institutions that offer more competetive fixed rates don't necessarily sell loans at variable rates of interest.