France gains from UK rate cut

Whilst the latest rate cut from the Bank of England may not have an instant effect on the UK property market, its implications should be wide reaching, helping to entice international property investors back into the European market, with France in line to reap some of the greatest rewards...

Last Thursday, the Bank of England cut the UK base rate to 1.5 per cent, the lowest rate in its 315 year history.

Although the latest interest rate cut is a popular move in the UK, it may not have much impact on the housing market in the short term.

Whilst the cuts will go some way to help homeowners, banks are expected to restrict lending further this year and this means life will remain difficult for potential buyers.

But, what the rate cut has already done is start to entice those investors looking to buy an overseas property back into the market.

Marketing Manager of Currencies Direct David Mbaziira said, "Sterling is now coming back against the euro because the rate reduction has helped increase confidence in the UK economy.

"At the same time, some investors may look to take advantage of cheaper mortgage products and relocate their assets," he added.

France is one of the countries that stands to benefit most.

Mr Mbaziira said, "Vendors and agents, particularly in France, will seek to capitalise on this influx and as an alleged European recession creeps ever nearer prices should stabilize."

In December last year, the level of sterling fell to near parity with the euro, but the New Year has seen a rise in value.

It may be imagined that when it comes to investing in France, it is the euro cut that could make the bigger positive impact.

But that may not be the case. Rajesh Agrawal of currency brokers RationalFX said that if the moves by the Bank of England help to bring recovery in the British property market, investment across the channel could benefit greatly.

He said, "Once these cuts are passed on to the consumer by the banks it could reverse the recent trend of falling house prices.

"Many homeowners in the UK may look to release equity in their property and reinvest elsewhere as the UK market has fallen more than the European market.

"France is the most likely beneficiary of this as it is so accessible nowadays it is one area that could really benefit from the UK turnaround.

"Northern France in particular could reap the benefits of the UK market picking up and exchange rate negatives could easily be outweighed by the projected jump in prices," he added.

In case you need further convincing, there are numerous other reasons why investing in France may be a good move at the moment.

The latest figures from French estate agents body FNAIM showed that the market is still rising and there are plenty of good mortgage deals available.

There is also a high level of public confidence of the population in the property sector and good potential for buy-to-let, with holiday rental yields of between four and seven per cent, plus permanent rental returns of six to ten per cent.

So what are you waiting for? Vive la France!

Picture by Solar Ikon