Resicom – Holiday Investment – 04-21 – LB

Eurozone mortgage rates hit record low

Low interest rates, currency swings and favourable mortgage rates are encouraging more Britons to buy property abroad. This might be a second home for holidays, a property investment intended for renting out, or a combination of both. And as the euro has fallen against the pound, British buyers have seen an upturn in their purchasing power, while interest rates on mortgages on the continent have never been so low.

Great deals in France

In France, a typical twenty year fixed rate mortgage can be had for 2.3% with a 20% deposit, though the French mortgage system doesn’t distinguish between residential and buy-to-let loans, judging both on the same criteria. Nevertheless, brokers French Private Finance have already done as much business in the first quarter of 2015 as in the whole of the previous year.

“If you’re British and buying in France it’s become 20% cheaper for you in the past six months,” said managing director John Busby. However, Busby also attributes some of their increase in business to investors in ski properties in Switzerland shifting their interest to other European countries after the Swiss Central Bank unpegged the Swiss franc from the euro in January, making the previously favourable currency much less attractive.

Portugal attracting buyers

Loan rates in Portugal also dropped by 1.5% in March, and in April were starting from 3.35% for a variable rate loan with a 30% deposit. The country is determined to attract overseas investment to make up for years of falling prices and stagnation. As a result, overseas mortgage brokers Conti received 40% more enquiries in the first two months of 2015 than in the same period last year.

“The reduced cost of funding together with continued interest from Portuguese lenders to assist non-residents to buy property means that deals are becoming cheaper,” said director Clare Nessling.

Eurozone quantative easing also promises to increase property values substantially in the medium to long term. With the European Central Bank investing heavily in assets like government bonds, there is likely to be a knock-on effect on the value of real estate investments, which will also rise.

UK mortgage deals

Back in Britain, at the beginning of April the Bank of England reported a six-month high in mortgage approvals, just as the Market Harborough building society launched a new mortgage loan intended specifically for buyers of second homes and holiday lets. Buyers can let a UK property for 15 weeks of the year as well as living in it themselves, and the mortgage comes with a 1.5% discount for five years on the society’s standard variable rate (deposits must be at least 25%). Most lenders class holiday lets as buy to lets, and mortgage conditions generally disallow the owners from living on the property. Other small lenders, such as the Principality, Bath, Leeds and Cumberland building societies, are also offering favourable holiday let mortgages. Although these are intended for properties in the UK, the easing of restrictions and favourable terms means that buyers are more likely to also look for property abroad in the form of a second home. Overall, there’s never been a better time for the average Briton to invest in European property.

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