BTL mortgage drought hits UK expats

BTL mortgage drought hits UK expats

0:06 AM, 6th June 2023, About 6 months ago 2

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A growing number of UK homeowners working overseas are finding themselves grappling with skyrocketing mortgage rates when renting out their properties, the Financial Times reports.

The newspaper says that these individuals are often required by lenders to switch from standard residential loans to ‘consumer buy-to-let mortgages’ – usually at higher interest rates.

In recent months, these rates have experienced a sharp increase, fuelled by the expectation that the Bank of England will push up rates to tackle inflation.

The situation is further complicated by the falling number of products in the expat mortgage sector.

Banks discontinued expat mortgages in early 2020

The FT says that many major banks discontinued expat mortgages in early 2020, as the UK’s exit from the EU imposed fresh regulatory challenges for British banks providing financial services throughout the bloc.

When expat borrowers reach the end of their fixed-rate agreements and seek refinancing, they may encounter interest rates as steep as 8% or 9%, according to lenders and mortgage brokers.

Some banks have even started rejecting expat remortgage applications or requests for larger mortgages.

And while some banks continue offering mortgage transfers – where borrowers receive a new rate offer from the same lender – the rates are significantly higher than before.

BTL mortgage market for non-UK residents

Lorraine McLean, head of BTL mortgages at Skipton International, which is based in Guernsey, said the bank had seen strong demand from expats who had been offered ‘a ludicrous rate’ when renewing – or nothing at all.

The bank said it had seen a 40% rise in completions in the first quarter of this year, compared with last year.

UK-based lenders lost the so-called ‘passporting’ rights

The FT article says that when the UK left the single market for financial services, UK-based lenders lost the ‘passporting’ rights that saw them to do business in any EU country with minimal extra authorisation.

One director at a major lender told the newspaper that before Brexit, lenders in the UK lending to EU or UK citizens across the EU had to show they were following lending rules in the UK.

Now they must follow the regulations in the borrower’s country of residence – and lenders don’t have the appetite or capacity to do this.

The lender was offering transfers on expat buy-to-let mortgages, the director said, but no longer offered loans to new expat customers and did not allow expanded mortgage borrowing for current customers.

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10:59 AM, 6th June 2023, About 6 months ago

Lenders don't have the appetite or capacity... unless the borrower pays a 'ludicrous rate'! This is extortion dressed up as a Brexit problem.

Bristol Landlord

0:15 AM, 7th June 2023, About 6 months ago

I really don’t understand these lenders, there are thousands of property owning borrowers with good high paying jobs and excellent credit, they just happen to live outside the UK, what’s the problem?
If the property is in the UK then what does it matter where the borrower lives?
If the borrower defaults on the mortgage payments then the lender goes after the property. If the issue is serving papers on the borrower then make them nominate a UK representative such as a solicitor. Even if no UK rep then serve papers at the last known address, even if overseas.
Does anyone know what the issue is with UK lenders and overseas borrowers?

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