Le Pen promises ‘mortgage portability’ policy if elected: what exactly is this?

The far-right Rassemblement National would bring in ‘portable mortgage’ rules if elected, presidential candidate Marine Le Pen has said. 

This policy would allow homeowners to benefit from interest rates on their current loan when switching mortgages.

It could save them hundreds of euros when buying a new home, but could see loans for new buyers entering the market rise considerably. 

While portability is currently a possibility for French mortgages, it is uncommon and rarely offered by banks.

It is the latest in a series of housing policies announced by Ms Le Pen in her bid for the 2027 presidency. 

What are portable mortgages? 

France is somewhat unique in Europe in that the vast majority of mortgages are at permanent fixed rates throughout the duration of repayment.

Unlike mortgages in the UK, which usually have a fixed interest rate for a set number of years then become flexible (unless renegotiated), the rate on the loan in France does not change. 

This is beneficial for those who obtained mortgages at low rates, particularly in 2018 - 2022 when interest rates dropped to as little as 1% for a 25-year mortgage.

However, in the event of a remortgaging, banks are under no obligation to offer the same rates as when the initial contract was signed. 

This can make buyers steer clear of moving to a new home and taking out a new mortgage, particularly if interest rates are noticeably higher than when they agreed their current mortgage.

This is one of the contributing factors that can lead to a property slump.

Ms Le Pen however wants to make “portability mandatory for mortgages previously taken out at more favourable rates,” she announced in a speech over the weekend.

This portability clause would allow homeowners to transport the rates and repayment schedule of an existing mortgage onto a newly-purchased property or remortgaged loan, without needing to take on newer rates if they are higher than their original mortgage.

Lenders would be required to let homeowners keep the rates, even if they are lower than current market rates.

Portability does not allow homeowners to take out a new 20- or 25-year mortgage at the same rate, however, only keep the current rates that are already in place.

If the new property is more expensive, an additional down payment may still be required if keeping the current mortgage rate. Otherwise a secondary loan, based on current market conditions, may need to be taken out to cover the additional costs. 

It is worth noting that portability clauses do not allow buyers of a new home to also take over the low-interest mortgage (transferring of such debt is an entirely different process, which while possible also remains rare). 

Hundreds of euros in savings possible

Calculations show that mortgage portability can provide homeowners with thousands of euros of savings.

For example: a couple has €150,000 and 15 years remaining on their original 25-year mortgage, taken out at a rate of 1.5%. 

This means they currently pay around €931 per month (excluding insurance), and pay around €17,000 in interest.

If they took out a new mortgage at 3.4% interest, the current average in France, monthly repayments would jump by €134, reaching €1,065. 

This would lead to an additional €24,000 in interest paid to the bank over 15 years. 

The above example does not factor in elements such as additional down payments for more expensive properties, mortgage insurance changes, etc, which portability rules would not cover. It does however show that such a policy would likely save movers money. 

Would first-time buyers be impacted?

There is debate on how the policy would affect first-time buyers, however.

Some argue that by making it easier to transfer advantageous mortgages, buyers would move into properties more suited for them (for example, families in smaller flats upgrading to more size-appropriate homes or older couples who still have a mortgage moving to smaller properties). 

This would free up homes on the market suitable for first-time buyers, and with more properties available prices could become more competitive.

Banks required to keep more of their low-interest loans on the books, no longer able to be replaced with higher-interest remortgages, would however need to make up for the loss in earnings somewhere. 

This could come in the form of higher interest rates for first-time buyers or those who finish their low-interest mortgages/need an additional loan if moving to a more expensive property.