A timely combination of historically low interest rates, bargain property prices and a strong pound is making overseas property investment much more affordable. And it seems that buyers are returning to the market in their droves.
Our enquiry levels were up by 90% in the first three months of this year compared with the same period in 2013. Confidence is back.
And this is being echoed elsewhere. Interest in purchasing overseas property surged during 2013, according to the Overseas Guides Company, which saw overall enquiries for the year increase by 33% compared with 2012, with growth driven by key European destinations. The new overseas property hotspots are, in fact, the old favourites with Spain and France topping the list.
It could, therefore, be a great time to consider the overseas mortgage market as a lucrative new revenue stream.
Viva España and Vive la France
The last six months have seen a sizeable shift in interest for Spain. Prices in some of the most desirable areas of the country have fallen by up to 50% since 2007, and people who have been watching the market are going for it in case they miss out on the best possible deals.
And contrary to popular belief, Spanish lenders are still willing to provide finance to foreign nationals, particularly if they can prove that they have a sound financial profile. Clients can generally borrow up to 65% of the value of the property, and rates currently start from just 3.3%.
The situation in France is also very good. A slower property market has been pushing prices down, and under current market conditions, vendors are more likely to be receptive to offers lower than the asking price. Mortgage rates are at their lowest in more than 60 years, starting from just 2.3% for a variable mortgage over 10 years, and 3.7% for a 25-year fixed rate mortgage.
As overseas mortgages don’t fall under UK regulation, they’re not directly affected by the Mortgage Market Review. That said, many of the standards introduced this month have already been adopted by overseas lenders.
In France, for example, lenders have been exercising a very cautious approach to lending, based on affordability, for some time, and other countries such as Spain and Italy are now using more stress-testing measures to ensure that borrowers are not taking on more than they can cope with, even if interest rates go up.
One of the biggest recent changes in the overseas mortgage market is that lenders are no longer using set criteria for decision-making – it’s much more down to the individual case. They’re using a more detailed assessment of incomings and outgoings, so it’s important for clients to have their accounts in good order, and they’ll use the debt-to-income ratio, which establishes whether borrowers can afford to maintain the mortgage repayments.
Come in, the water’s lovely
There are many reasons to tap into the overseas mortgage market as a lucrative new revenue stream, not least the valuable commission-earning opportunities – an average of £600 per completed case.
More than 100 brokers are registering every month, and many who are trying it for the first time are surprised at how easy the process is and are now actively seeking more overseas opportunities. It can be an easy earner too – the case is handled from start to finish while you get on with the day job.