Euro-denominated mortgage borrowing remained cheaper than sterling borrowing in September 2026, although the gap was beginning to narrow as the European Central Bank raised rates. This article examines what changing interest rates mean for UK buyers financing property in France and Spain, including the differences between fixed- and variable-rate mortgages and the currency risk faced by sterling earners borrowing in euros.

On 16 September, the European Central Bank's deposit rate rose to 2.50%, its second increase of 2026. Four days later, the yield on France's ten-year government bond stood at 4.48%. Both numbers matter to anyone earning in sterling and buying property in France, Spain or Monaco, because for three years the arithmetic of cross-border borrowing has rested on euro money being materially cheaper than the pound.

It still is. The Bank of England held Bank Rate at 3.75% on 17 September, and Moneyfacts puts the average UK two-year fixed mortgage at 5.92% and the five-year at 5.94%. In France, September broker data puts average 20-year mortgage rates at around 3.5%, while the latest Banque de France data shows the average rate on new housing loans at 3.30% in July. The spread remains wide, but its direction has changed.

France's ten-year government bond yield also illustrates the changing backdrop. The Agence France Trésor recorded a TEC 10 yield of 4.48% on 17 September, before it moved higher later in the month.

The ECB's move followed eurozone inflation rising to 3.3% in August, with energy inflation reaching 14.3%. The ECB said the conflict in the Middle East was continuing to generate inflation pressures and that inflation was expected to remain above target for an extended period. Christine Lagarde has therefore maintained a cautious stance on the inflation outlook.

France and Spain are feeling the change in different ways because their mortgage markets are built differently. France is almost entirely fixed-rate: 99.4% of new housing loans were fixed-rate in July, according to the Banque de France. A borrower who has received and signed a fixed-rate offer is therefore insulated from subsequent changes in market rates. The exposure sits in the period between agreeing a purchase and receiving that offer, which in a French transaction, with the notaire's timetable and the bank's own process, is rarely short.

Spain runs largely on variable rates linked to the 12-month Euribor. The index averaged 2.954% in August, according to the Bank of Spain. The September figure is due to be released on 1 October. For a €300,000 loan at one percentage point over Euribor, a 0.1 percentage-point increase in the reference rate would add roughly €25 a month to interest costs before considering amortisation.

For non-resident borrowers, the Spanish market also includes fixed, variable and mixed-rate structures. Market commentary indicates that some lenders have become more cautious about offering fully fixed products to non-residents on larger loans, with mixed structures becoming more common. Terms vary significantly by lender and borrower profile.

Islay's View

For a French fixed-rate loan, the key consideration is not simply whether rates are rising or falling. The rate that matters is the one available when the bank issues its offer, and the completeness of the application can influence how quickly that point is reached. Preparation can therefore reduce the period between agreeing a purchase and fixing the cost of money.

The currency decision also deserves more attention than it usually gets. Borrowing in euros against a euro asset matches the debt to the property. Earning in sterling while repaying in euros creates a separate currency exposure: if sterling weakens, the sterling cost of every repayment rises, as does the sterling value of the outstanding euro debt.

A narrowing rate differential changes the balance between the potential interest saving from euro borrowing and the associated currency exposure, without removing either. At Enness, we find this decision is often considered late in cross-border cases, when it is better examined at the outset alongside the choice of lender and the structure of ownership.

The cost of money is not the only thing moving buyers. Knight Frank reports that Italian prime residential transactions increased by 140% year-on-year during the eight months through August. It also reports that more than 60% of superprime international enquiries are driven primarily by tax considerations, principally reflecting Italy's flat-tax regime for new residents.

For a growing number of internationally mobile families, residency and tax are influencing where they buy, and finance is being arranged around that decision rather than driving it.

The Bank of Spain's confirmed September Euribor is due on 1 October. The Bank of England, which held Bank Rate in September while the ECB and US Federal Reserve both raised rates, announces its next decision on 5 November.

Important Information

This article is for general information only and does not constitute financial, tax or legal advice. Rates quoted are third-party market averages from the sources named, correct at the date of publication; they are not offers or quotes from Enness Global, and the terms available to any borrower will depend on their circumstances.

Changes in the exchange rate may increase the sterling equivalent of your debt and your repayments.

Mortgages secured on property outside the UK are not regulated by the Financial Conduct Authority.

Your home may be repossessed if you do not keep up with your mortgage repayments.

We are a credit broker and protection intermediary, not a lender. Enness Global is a trading name of Enness Limited, registered at 64 North Row, London, W1K 7DA. Company registration number 07760090. Authorised and regulated by the Financial Conduct Authority. FCA registration number 565120. We may receive commissions that vary depending on the lender, product or other permissible factors.