Interest Rate Cut Can Boost French Property Market

In the long term it should become easier for UK residents buying French property to borrow from British lenders, with Lloyds TSB and Abbey already passing on the cuts to its clients.

French Property News Editor Karen Tait commented: "If the French property market follows the British market, as it is often said to do, the rate cut can only be seen as a good move. It will give people more money in their pocket and hopefully ease the credit and consumer crunch in the UK. While I wouldn't expect the rate cut to be followed by hordes of people rushing to buy a place in France (and forcing prices up again, which no househunter wants), I do think it will take some of the pressure off people and enable those who are serious about buying a French property to feel more confident to go ahead with a purchase."

Equally, initiatives introduced by the Sarkozy administration to enable French buyers to acquire capital should have positive effects for expat purchasers as more desirable rural accommodation becomes available on the back of a supported domestic market.

David Mbaziira of Currencies Direct said, “Eventually rate cuts filtering through from UK lenders will increase the availability of capital and credit in the UK which will precede a revival in French property prices. With regards to private trades we are seeing a definite increase in the number of forward contracts and buyers signing and paying deposits; it’s simply a case of waiting to see whether or not this momentum is carried into the New Year.” He continued, “Any favourable retail figures from the UK over Christmas will boost interest and the intent to buy, and the government’s encouragement for the UK to spend its way out of a recession, if heeded, cannot help but add to the pounds value.”

TJames Knightley, an ING economist, expects more aggressive rate cuts, with the Bank's base rate down to 2.5 per cent in December and 2 per cent in January.

Many see the rate cuts as a welcome and bold move by the Bank, in response to the unique economic situation. For those looking to move into the French property market and see any real benefits, the Government must insist that the banks pass the rate cut on to homeowners. Only when this happens will the actions taken by the Bank and Government result in a return of some sensible levels of mortgage lending and increased consumer confidence.