With around 5.5 million British citizens living abroad, many of whom already owning a UK property, there is a huge market for expat mortgages.
I’ve personally experienced life as an Expat while living in Hong Kong during 2009/10, and the network I managed to develop gave me the opportunity to tap into this market when joining Capricorn as a mortgage adviser at the end of 2010.
The tight-knit nature of such communities naturally leads to referrals amongst friends and colleagues, and not before long I was able to offer advice on a range of lending options for such clients.
At the time, however, there were far more lending options, which in recent years has since been scaled back; presenting a potential challenge for expat mortgagees.
Lloyds Banking Group decided to withdraw from lending to expats following a review of its mortgage proposition at the end of 2012. This was a personal blow considering I had a few ongoing expat applications within the group, and they suddenly pulled out and didn’t continue with any ongoing applications.
NatWest offered a product known as ‘Expat Buy-to-Live’, whereby residential mortgage products were afforded from their standard range, under the premise that within a period of 2-3 years, they were to live in the subject property.
Aside from NatWest, and for clients who were purely looking at ownership as investment, we were (and still are) able to access competitive, yet less attractive products through Bank of China, RBS International, Barclays Wealth, amongst others.
The European Mortgage Credit Directive (MCD), which was enforced in March 2016 introduced the concept of foreign currency loans, whereby the credit is denominated in a currency other than that in which the consumer receives the income. MCD stipulates that such a customer has the right to convert the mortgage into an alternative currency or that arrangements must be in place to limit the exchange risk to which the customer is exposed.
The new rules also require firms to regularly update such customers when exchange rates vary by 20% or more. This naturally caused an admin headache for lenders, which, along with NatWest’s perceived over-exposure to the Expat market, caused them to withdraw from lending to Expats altogether.
Of course, this is a European driven directive, and in the wake of Brexit and eventual withdrawal from the constraints of EU mortgage policy, we may see this ruling altered.
Brexit has also presented other opportunities for overseas buyers & Expats alike, mainly the fact that the pound is significantly cheaper than it was at the start of the year. There are also a number of deals to be had whereby developers or investors are dropping prices to meet current market sentiment.
We also saw Singaporean lender, United Overseas Bank (UOB), announced a freeze on lending on the London property market, which took an unnecessary spotlight in the headlines, given that they represent such a small proportion of the overall lending market in the UK.
My understanding, is that UOB took this step as a precautionary measure given that they had so aggressively targeted the London market, and the fluctuation in currency had left them somewhat exposed. Shortly after, I’ve been given the impression that they will continue to lend, however for the time being this will be only on selected new-build developments, to strongly profiled clients, and no longer on contract re-assignments.
There still remains plenty of alternative lending options for foreign nationals and British Expats, and withdrawals from the market from the likes of Lloyds, NatWest, and UOB have led us only to further strengthen our panel of non-resident lenders, which now include the likes of Skipton International, Kent Reliance, and Dragonfly.
Over the years, here at Capricorn we have really strengthened our non-resident lending proposition, and continue to venture overseas to attend seminars & exhibitions to further cement our network of clients and professional introducers. Currently our offering is stronger than it’s ever been, despite a host of regulatory, political, and wider-market changes.
CHANGES IN EXCHANGE RATE MAY INCREASE THE STERLING EQUIVALENT OF YOUR DEBT.