Wealthy homeowners are borrowing against their property to invest in bonds, equities, alternative investments or commercial property as the low cost of debt creates opportunities for “mortgage arbitrage”.
Interest rates of less than 2 per cent on two- and five-year fixed-rate home loans are tempting high-income, mortgage-free homeowners to raise money against their property in the hope they can profit from higher rates of return elsewhere. For debt-free homeowners, remortgaging during the years of booming house prices was often a means of raising cash to carry out home improvements or expand a buy-to-let portfolio. But slowing house price growth and a regulatory and tax crackdown on landlords have made these options less attractive.
Hugh Wade-Jones, group managing director of mortgage broker Enness, said: “It’s accepted that property is no longer going to be the all-conquering investment, doubling every 10 years, so people are looking elsewhere for returns.” Borrowers with housing equity are putting money into everything from bonds and private equity and commercial property, brokers said.
For some, the latter had become more attractive than buy-to-let as the top rate of stamp duty on commercial property is 5 per cent, compared with a top rate of 15 per cent on higher-priced residential rental properties, following the introduction in April 2016 of a 3 per cent stamp duty surcharge on buy-to-let.
Growing numbers are prepared to risk using their primary residence as collateral, but some are prepared to gamble on extremely volatile assets. One broker said a mortgage-free homeowner with a house valued at £10m had taken out a fixed-rate loan of just under £2m to buy bitcoin, the crypto currency that has seen huge volatility in recent months. Others have invested in classic cars or fine wine. One former banker took out a £500,000 mortgage, not for investment purposes, but to provide a fund for routine spending and other eventualities.
France is one of the most popular property markets for foreign nationals: we are all aware of the chic appeal of Paris, the enduring allure of the Riviera in the summer or the freshness of the mountains in winter.
Covering everything from search and negotiation to making an offer and the legal processes, the guide will help you fulfil your dream of property ownership in France.