France Introduces 0% Mortgage Rates for First Time Buyers

Current mortgage rates are at historic levels, but zero percent is unheard of. Today the president of France Nicolas Sarkozy unveiled the details of a new plan that will provide home loans at zero percent to first time home buyers.

Zero percent home loans to increase home-ownership in France

Sarkozy's plan aims to close the gap between France and the other major European countries in terms of real estate and home-ownership. Only 56 percent of the French people owned their homes in 2007. While the rate of home-ownership has increased in the country between 2002 and 2007, Sakozy said it will take 40 years for France to catch up with the EU average if the country's home-ownership grows at this rate. The EU average is about 70 percent.

The head of the state, speaking at a construction site at Val-de -Marne near Paris, said his administration came to conclusion that the country's real estate and housing system needs thorough changes. This new plan, called "PTZ+," will replace the currently existing three schemes, including the former zero-interest loan plan. The "PTZ+" will only be reserved for the first-time home buyers.

Those buyers will benefit from free credit for an amount of up to 40 percent of the property's price. The ceiling of the rate will be flexible. The maximum percentage will be reserved for new homes, for energy efficient homes and in areas where the housing is tense and therefore, expensive. This will primarily apply homes for sale in Paris, Lyon, Marseille and Cote d'Azur.

The rate of zero percent financing will come down to 10 percent for existing homes where the energy performance is low and less efficient.

PTZ+ zero mortgage rates will take into account several factors when granting the interest free loans. It will take into account the level of household income, repayment periods and the number of people in the household.

The rich will get up to five year financing. The poorest areas will get up to 30 years of financing at these rates. The objective of the plan is to give away about 380,000 PTZ+ home loans, L'Express reports.

Current Mortgage Rates in USA

PTZ+ is expected to cost 2.6 billion euros yearly. The government believes that this new home purchasing plan will primarily benefit the country's lower class. The CEO of the advocacy group Nexity, Alain Dinin critiqued the plan saying while it helps the lower class the program does not benefit the middle class.

Back in the United States the Obama Administration is planning to hold a Regional Conference on Housing Finance Reform in Charlotte on Thursday, October 7. The goal is to find new ways and ideas through public input on how to reform and boost the country's financial and the housing system.