French banks passing on interest rate cuts

Can anyone tell me if French banks are passing on ECB reductions? I have a mortgage with BNP which is due for renewal on Dec 15. When I enquired as to rate reduction with BNP they told me rates have gone up!! How could that be?

Re: Franch banks passing on interest rate cuts

They can set rates at what every they want too, up, down, same. It does not 'track' the ECB, unless you have a tracker mortgage. (No pun intended)

Re: Franch banks passing on interest rate cuts

I believe the interest rate reductions are only for owner-occupier mortgages in France- not for investors. You also have to be careful with regard to even some of the bigger banks in France- there have been recent controversies about banks not passing on cuts and even where they agreed a fixed rate, still increasing- so bottom line, keep an eye on your repayment with regard to the initial loan agreement.

Re: Franch banks passing on interest rate cuts

I am in the process of taking out a mortgage with BNP Paribas. It has been an interesting process very efficient and so far positive!

We got a rate of Euribor 3 mth + a margin of 1.6. The rate will only change if there is a difference of more than 0.10 interest rate points compared tothe rate applicable before the adjustment.

We have a fixed monthly payment and the term is 30 years. If the interest rates are in our favour then we should in theory pay the mortgage off early. If the rates are against us then the term of the mortgage can be extended by a maximum of 5 years.

What has your experience of a mortgage tracking Euribor been? Have BNP been passing on the decreases as well as the increases?

Re: Franch banks passing on interest rate cuts

eddieore said:

Can anyone tell me if French banks are passing on ECB reductions? I have a mortgage with BNP which is due for renewal on Dec 15. When I enquired as to rate reduction with BNP they told me rates have gone up!! How could that be?

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Your mortgage rate is probably tracking Euribor which is the reference rate that most continental banks use to lend to each other. The Euribor has been stubbornly high due to the credit crunch. Unfortunately Euribor is not effected direcly by a change to the ECB rate. If there is confidence between the banks lending to each other and ECB rates are lowering then Euribor will decrease but if banks are unsure about lending to each other then Euribor rates will continue to be higher than ECB. What I can't understand is why the Irish banks hedged their bets solely on ECB rates instead of Euribor. The Irish banks are now being forced to pass on ECB rate cuts to tracker customers because they used this as their reference rate. I can't help thinking that the reckless lending of the past few years would not have occured if Euribor had been the reference for setting mortgage rates in Ireland.

Re: Franch banks passing on interest rate cuts

very interesting,i have a french mortgage with GE moneybank,the same story,when i emailed them when rates were coming down their reponse was "wait be patient"
methinks i better not hold my breath!,just a thought would it still be possible to change to an irish provider?,its about 50% loan to value.


Pat

Re: Franch banks passing on interest rate cuts

Called up Credit Foncier on behalf of a client yesterday. He was paying rates of 5.65% when the Euribor 3 month rate is currently 1.9%.

The mortgage is recalculated every 3 months. But instead of lowering the monthly repayments (which is what he wanted, as he's under pressure), the bank reduce the duration.

They change the monthly payments based on the Euribor once a year in November.

And there's a high early repayment fee.

I posted the initial thread and bottom line is that my repayments have stayed the same for 2009, so no reduction passed on. When I asked about either clearing it off (by remortgaging in Ireland) or making a lump sum repayment, I found that there are huge penalties until year 15 of my mortgage. My rate is 5.94%, including life assurance, with repayments €884 per month on an initial €125000 borrowed in 2005

eddieore said:

my repayments have stayed the same for 2009, so no reduction passed on.

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You may have benefited from rate reductions during this time. The monthly installment is fixed for the term of the mortgage. If interest rates decrease the capital portion of the repayment increases while the interest portion decreases in line with the rate reduction. Check it out with BNP directly. I have found them very helpfull when I contact them by email: customerservice@bnpparibas-pf.com

Good news arrived recently when BNP advised they have been overcharging me and did not pass on the reductions they should have. My monthly repayments have now reduced by a whopping 20% !!