United Kingdom


Change in lending criteria making it harder for British expats to get mortgages

by Ray Clancy on February 22, 2017

British expats are finding it increasingly difficult to get a mortgage to buy a property in the UK due to tougher lending requirements that were introduced at the start of the year.

Many expats like to buy property in the UK as an investment and let it out so that they have the option of using it as a home if they move back to the country.

But since the beginning of the year changes to buy to let mortgage affordability lending criteria mean that lenders now require borrowers to receive a higher level of rental income.

It comes at a time when demand for buy to let mortgages from expats and overseas buyers in general is rising.

Foreign nationals from the Middle East, Asia, Europe and the United States as well as British expats view British property as a safe haven asset, according to Darren Mead, head of mortgages at independent financial advisors deVere Group.

He pointed out that due to the relative weakness of the pound, buying in the UK has become more attractive in recent times but overseas investors are being turned down by mainstream, high street lenders.

‘Expats have been typically deemed as a higher risk by UK lenders, even if they have substantial assets and a high salary. Due to the changing criteria, buyers are finding it more difficult,’ said Mead.

‘This is because more common lenders now require borrowers to receive a minimum of 145% of their mortgage costs in rental income. Previously it was 125%. This change to lender affordability criteria, could have potentially significant effects on the UK’s property market for expat buyers if they are not made aware prior to making a mortgage application,’ he added.

Skipton International, which specialises in providing mortgages for overseas buyers, has also seen a rise in demand. For example, since the start of 2017 the lender has seen some of its highest levels of applications for UK buy to let mortgages from Hong Kong over the past three years.

Indeed January has been the busiest ever for the expat mortgage provider, with a 250% increase in applications from British expats in Hong Kong since January 2016 and a 46% increase in applications from clients around the world.

The Guernsey registered lender launched its buy to let mortgages in 2014 in response to the difficulties many British expats faced when trying to invest in property. Normally January is a quieter month for mortgage applications but this year we have not seen any slackening, instead, we have seen the number of applications continue to grow,’ said Nigel Pascoe, director of lending at Skipton International.

‘UK buy to let remains a very popular long term investment for British expats. We saw a large increase in applications following the devaluation of Sterling last autumn, with expats viewing it as an opportunity to use foreign savings to buy UK property. Investors can benefit from long term capital gains, while servicing their mortgage from rents paid in the local currency,’ he explained.

London remains the key place to invest. Up to 40% of Skipton International’s expat mortgage customers are investing in buy to let property in Greater London with another 25% in the South East of England.

Skipton International has updated its online mortgage calculator for expats and also opening a new mortgage centre on neighbouring Channel Island Jersey in April 2017.

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