12 January 2025 | By John Busby
January 25 European Mortgage market update
European Mortgage market rates
European Mortgage Market Update
ECB Cuts Rates Again Amid Inflation Rise and Growth Concerns
The European Central Bank (ECB) reduced rates again yesterday by 0.25%, the latest move following the 0.25% cut in December. The main deposit rate is now 2.75%. The decision was made against the backdrop of a slight rise in the inflation figures in the European Union, with the headline rates increasing to 2.4%, just above the target 2% figure.
Market forecasts and Euribor swap rates continue to predict a softening of the bank’s stance following this decision with another cut in prospect in the New Year. The 6-month Euribor swap rate is at 2.59% indicating further reductions to come over the course of the next 6 months. The next opportunity to change the rate is in March with many predicting the next rate cut at that point.
These cuts are now firmly tipping the balance towards a favourable environment for the purchase of property in the EU especially now that variable rates are available which start with a 3. However, higher inflation and political uncertainty have pushed the 3-swap rates up 30bps since December with those rates now at approximately 2.3%. This makes short-, medium- and long-term borrowing possible at circa 3.7%. If growth continues to slow then we can expect the rates to come down further and faster than the market currently expects despite better growth prospects in Southern Europe.
Swiss rates are still very attractive and Swiss residents can now find Swiss rates for the purchase of Italian property up to 60% LTV without collateral.
European Mortgage Market Rates and Indices
| Market indicators | Local 20 year fx | Private bank rates |
|---|---|---|
| 3-month Euribor: 2.85% | France: 3.8% | 3-year fix: 3.6% |
| 5-year swap rate: 2.29% | Italy: 3.7% | 5-year fix: 3.8% |
| 15-year swap rate: 2.45% | Spain: 3.0% | 20-year fix: 3.8% |
| Average margin: 1.30% | Portugal: 3.3% | Euro variable: 3.9% |
| Swiss Base Rate: 0.5% | Swiss: 1.5% | Swiss variable: 1.5% |
These rates are widely available for US and UK based buyers usually at 70% LTV. These rates are a general guide, indicative and subject to client circumstances. Private banking deals will require a minimum of 30%–50% of the loan amount in assets under management. Traverse arranges purchase and refinancing deals in the above locations. For more accurate rates, please get in touch by either replying to this email or via the website.
Case Study: No Mortgage Clause, No Problem
The story opens:
These buyers for a property in the South of France were faced with a common issue in France: the sellers did not want to sign a contract subject to Finance. This can be a real issue as many lenders will not progress an application without a signed copy of the purchase agreement. The buyers also wished to use funds from their UK LTD company to fund the deposit and assets required by the bank. This can also be difficult for many banks to accept.
Traverse closes:
We used the draft contract to arrange a mortgage loan, and have it agreed in advance so that the buyers knew that their finance would be in place before signing. We also arranged that funds from the UK company could be used as contribution. We ended up with a 100% loan for €3.4M at 3.8% fixed rate for 20 years. The loan was 50% on an interest-only basis and 50% on repayment and required 45% of the loan to be placed with the bank in assets.