Knight Frank Finance partner, Traverse International Finance, discusses three trends currently impacting the European mortgage market.
A switch to a buyer’s market, a rise in US enquiries and an increase in homeowners refinancing are the three key trends impacting the European mortgage market today, says Traverse International Finance head of sales, John Busby.
The disruption across global property markets, including the rise in interest rates and slow house price growth, is driving the trends, he says.
“Buyers are more in control. Whereas previously there might have been 50 buyers looking at prime properties (homes valued over £10m) in Cannes in any one summer, now there are more like ten,” John begins. “So, if there are 15 places on the market at that price point, 10 sellers could be disappointed.”
Traverse International Finance, our new partner for international mortgages, helps clients looking to buy or refinance a property in France, Monaco, Switzerland, Italy, Spain and Portugal. They have partnerships with private and retail banks across the UK, the Channel Islands, France, Luxembourg, Monaco and Switzerland.
This shift to a buyer’s market is prompting some sellers, particularly in the luxury space, to consider refinancing options, John adds.
“These sellers are generally unencumbered by a mortgage, so are less likely to sell if they aren’t getting the price they hoped for. Refinancing offers them a way to release equity in their properties until they get the amount they want.”
It also provides them with an opportunity to invest those funds, with the interest gained on investments currently higher than six months ago. “This is one way they can really optimise the equity in that property.”
Competition within the prime property market, however, remains high, particularly for those well-located properties. It’s important for prospective buyers to get an agreement in principal to secure the best conditions for their purchase.
“Providing documentation such as an agreement in principle can be useful to show intent and give comfort to the vendor. Some vendors will not accept finance in a purchase contract so in some cases, part of our service at Traverse is to help get that comfort for buyers of prime property who cannot insert a mortgage clause into the purchase contract, which protects the buyers deposit if no loan is secured.”
Elsewhere in the market, US enquiries are on the rise. “More US buyers are looking to leverage the strong dollar and are now able to look more at the European property market because of increased flexibility with remote working.”
Traverse has been helping overseas purchasers in this space, he says. “We’ve been helping international buyers navigate the complex European mortgage market. This includes early discussions for purchase, agreements in principal and helping with processing times. By working with their financial advisors, we can also help them structure property purchases to mitigate their tax burden.”
Looking to discuss the borrowing options available for your clients who are buying or refinancing their property in Europe? Email contact@traverseif.com for expert advice and access to market-leading solutions.