Expat lenders cutting rates as overseas buyers replace accidental landlords

Ex-pat mortgage broker Offshore Online also believes that the market is likely to be more resilient when the next interest rate rise occurs with lenders not needing to increase rates significantly.

Offshore Online director Guy Stephenson told Mortgage Solutions that ex-pats were taking advantage of opportunities in the UK property market.

“There’s two reasons people are going overseas: to earn more money to retire sooner and to buy property, and they are all hungry for property, providing the price is right,” he said.

“There’s not a lot of confidence in the UK market with the Brexit cloud hanging over everyone and the tax situation for landlords, and we’ve seen some real structural changes in the market.

“So accidental landlords will drop out while ex-pats are not subject to those same pressures,” he said.

Stephenson acknowledged that the vast salaries often attached to expat postings were not what they were 10 years ago, but said it was still advantageous financially compared to UK residents.

“For example, a project manager in Dubai will get paid about the same as in the UK, but it will be tax-free, so they have a higher disposable income,” he added.

Lenders cutting rates

He also explained that rates were falling as lenders looked to respond to changes in Bank of England sentiment and maintain their position in a competitive market.

“Six months ago the hints from the Bank of England were that there would be two base rate rises this year,” Stephenson continued.

“Lenders in the ex-pat market reacted quickly to this by increasing their rates early in the year, but when they saw that the pressure was easing, such as the lack of a base rate rise in May, they started dropping rates.”

He also added that many ex-pat lenders have significant margins on their products which they can eat into without increasing product interest rates.

At the moment, variable rate loans are available for expat buy to let purchases from 2.89%, while two-year fixed rates are around 3.19% and five-year fixed rate at 4.19%.