France escapes credit ‘wrath’

France’s strict consumer laws have stopped the country falling victim to the credit crunch…

In France lenders have always been forced, due to strict consumer laws, to lend in such a way that a sub-prime market is not possible and therefore the wrath of the credit crunch has not been allowed to have the same affect in this country.

In addition, with Nicolas Sarkozy's pledge to create a nation of homeowners, the mortgage industry has in fact seen a major boom leading to the launch of increasingly more competitive mortgages during the first half of last year according to Katy Hepworth, Overseas Mortgage Manager of Assetz Finance Limited.

Assetz Finance is warning potential borrowers that French lenders are currently reviewing underwriting criteria and buyers should be aware that making a clear and complete application to French lenders is as essential as it has always been.

Lenders taking a harsher view

In fear of the sub-prime issue reaching their doors, lenders have started to take a harsher view on some borrowers that they were previously slacking their policy for. For example, one lender, Credit Foncier de France, has issued the criteria that in order to qualify for their 25 year term mortgage a debt to income ratio of the standard 33% will no longer be sufficient and in fact the borrower will need to prove that his debt to income ratio is in fact only 30%.

Another lender has introduced a new policy that they will not assist purchasers to mortgage a property in France that is worth more than their property in the UK or if the borrower does not own a property in the UK. If other French lenders take up on this policy this will be particularly bad news for first-time buyers who were turning to the property market over the Channel due to being priced out of their own market.

Assetz Finance warns that although France has not had to deal with a Northern Rock-style calamity it is a very cautious nation when it comes to financial matters and therefore issues that have hit other countries have made French lenders keep their guard and tighten up in some areas merely for fear of a fate such as those lenders in the UK and US.

As long as the French are able to keep the credit crunch at arm's length, the market for French property certainly looks very attractive.