Locking in low-cost borrowing to keep powder dry for investments

After more than a year of rate cuts, the European Central Bank has entered a period of stability. With the deposit rate steady at 2.00 per cent and inflation moving close to target, the window for highly competitive euro borrowing may now be as favourable as it gets.

For many private clients and family offices, the message is clear: borrow strategically while conditions remain benign rather than reactively once markets tighten again. Increasingly, investors are securing lending terms today while keeping their liquidity powder dry for opportunities ahead.

Rate stability and margin compression

The ECB’s sequence of eight cuts between mid-2024 and late-2025 has reshaped the landscape for cross-border borrowers. Margins on prime, non-resident loans have narrowed to around 1.2–1.4 per cent in France, below 1 per cent in Spain and Italy, with long-term fixed rates typically between 3.2 and 3.8 per cent depending on structure and jurisdiction.

By contrast, the Bank of England’s base rate remains above 4.5 per cent, and sterling lending by private banks continues to price well above comparable euro facilities. The resulting spread has re-opened the case for euro borrowing, particularly among UK-based clients seeking to diversify or refinance assets on the Continent.

Some investors are also using the flatter euro swap curve to pre-finance acquisitions or refinance at lower rates, while retaining the flexibility to deploy funds later.

From reactive borrowing to strategic liquidity and opportunity

Traditionally, cross-border buyers arranged financing only once a purchase was underway. That approach is shifting as investors recognise that today’s euro lending costs create opportunities not just for property acquisition, but for broader portfolio strategy.

“Clients are asking us to structure credit lines or partial drawdown facilities ahead of time,” says John Busby, managing director of Traverse International Finance. “If the right opportunity arises, they can transact within days rather than months, while rates are still anchored at historic lows.”

A typical arrangement might involve securing a €2–3 million facility on an existing asset or through a private banking relationship, with part of the line undrawn until an investment emerges. For some clients, the motivation is not only to maintain flexibility but to arbitrage the cost of borrowing: using low-cost euro debt to fund assets that deliver higher returns, whether through property renovation, capital markets exposure or alternative investments.

In effect, cheap liquidity has become an asset class in its own right. Borrowers who once viewed leverage purely as a tool for acquisition are now using it as a means to preserve optionality and enhance yield.

Private banks take the lead

Private banks in Luxembourg, Monaco and Switzerland have been quick to support this trend. Many are offering hybrid facilities that combine a term loan with an undrawn tranche available for future investment or renovation.

These structures complete underwriting once, allow later drawdowns without repricing, and protect borrowers against future rate volatility. A €5 million facility, for example, might be arranged as a €3 million term loan plus a €2 million revolving component at Euribor plus 1.3 per cent, producing an effective rate of about 3.4 per cent APR. The undrawn portion carries only a modest commitment fee, providing a cost-efficient hedge on future liquidity needs.

Diversified strategies across Europe

France and Spain remain the most active destinations for euro-denominated borrowing, but demand in Italy and Portugal has strengthened through 2025. Switzerland continues to offer the lowest nominal rates—around 1.2–1.5 per cent—but can require higher collateral and liquidity levels, keeping it a specialist market.

Across all jurisdictions, Traverse has seen a consistent pattern: clients refinancing existing assets or purchasing with debt while maintaining borrowing capacity for new opportunities, especially in the luxury and mixed-use sectors of southern Europe.

Risks and considerations

Even at low margins, undrawn lines incur small holding costs, and foreign-currency borrowing introduces exchange-rate exposure for sterling investors. Regulatory proposals, such as potential restrictions on non-EU buyers in Spain, could also affect strategy.

Tailored advice remains essential to align financing, tax planning and ownership structures across borders.

Outlook

The European mortgage market now offers a rare moment of equilibrium: base rates are stable, lenders remain active, and margins continue to tighten for prime borrowers. Such conditions rarely last.

If inflation stabilises or political risk rises, spreads could widen again in 2026. For those able to borrow now, securing flexible credit while rates remain low could prove a decisive advantage.

“Borrowing is not just about cost; it’s about control,” Busby says. “Having credit lines in place gives clients the confidence to act decisively when the right asset appears.”