Over-60s can now unlock capital in France

A new firm is helping people over the age of 60 cash in some of the value of their property in France by borrowing money against it.

While relatively common in countries such as the UK, these offers are rare in France, especially since a bank specialising in them, Crédit Foncier de France, part of the BPCE group, was shut down in 2019.

In part, this is because mortgage lending (prêt hypothécaire) makes up only around 30% of house purchase lending.

Most people have normal bank loans often linked to the same bank where they have PEL (plan épargne logement) accounts, showing they have capacity to put money aside regularly.

Banks subscribe to a special fund run by Banque de France, which provides some guarantees against house loans going bad.

The new firm, called Arrago, was founded by four friends who had careers in co-operative banks in France.

“We knew of the lifetime mortgages offered by Crédit Foncier de France, and that the bank was shut for reasons other than the lifetime mortgages which made up just 1% of lending on its books,” Alexis Rouëssé, CEO and co-founder, told The Connexion.

“It was one part of the business that interested UK investors when they considered buying the bank.”

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Arrago started operating in April 2023, and by December had arranged lending against property of €50m for around 400 clients.

It aims to arrange €100m of lending in 2025 and €200m in 2026.

The company acts as an active broker for two banks – one a subsidiary of Crédit Mutuel and the other Crédit Municipal de Nantes.

Unlike most remortgage solutions in the UK, the mortgages arranged by Arrago do not have to be paid back, with interest accumulating to be paid usually when the lender dies or decides to sell the house.

Higher interest rates

Interest rates are higher than most home loans in France – at around 6% – and Arrago’s model depends on the value of the house rising over a 10-15-year period.

The property used to obtain the mortgage must have a minimum value of €150,000 and the amount borrowed varies between 20% and 60% of its value.

“With our dependence on house values, I am afraid that someone in a deserted rural area, miles from anyone, will not be a good proposition,” said Mr Rouëssé.

“Estate agents will tell you such houses often only have one buyer, and if they do not go down the road at the right time, it is very difficult to sell.”

But he says the company model opens lending to many people who would not have a chance of loans from traditional banks, where decisions are taken on revenue rather than the value of property.

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How to check if your house could be eligible

The company has a simulator on its website, using postcodes, to tell people if their houses have a chance of securing a mortgage.

Aimed at people over 60, the company has some clients in their 50s, but says it gets more difficult to arrange mortgages with its model for people over 75.

Theoretical examples given on the company’s website include 'Bernard', aged 78, who owns a house worth €560,000.

Arrago arranges a maximum loan of €230,000 with a bank, and Bernard takes advantage to borrow €170,000 for work on the house and to pay for a granddaughter to take her driving test.

When he dies 10 years later, the house is valued at €630,000, and the amount of the capital and interest on the loan is €317,618. This leaves his inheritors two options: either repay the capital and interest or let the bank sell the house and pay the inheritors €312,382.

“The historic way of getting capital out of property in France is the viager system (where a buyer pays the seller a mix of a lump sum and a rent, getting control of the house when the seller dies) but that does not leave anything for the family,” said Mr Rouëssé.

“There is also more supply than demand, so viager sales often get prices at the lower end of expectations.

Arrago is not alone in the market – there are several companies such as Merci Prosper, Hyppo and Dillan, which also offer variations of lending against the value of a house, sometimes by buying shares in the property. 

However, Mr Rouëssé says its success to date is because it precisely targets people ages 60 and over who want to unlock capital in their house.