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Addressing mortgage challenges for new arrivals to the UK – Subbramoney

by: Praven Subbramoney, chief lending officer at Nottingham Building Society
  • 24/04/2024
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Addressing mortgage challenges for new arrivals to the UK – Subbramoney
As the demographics and needs of mortgage borrowing evolve, it is critical that lenders like us review our solutions and ensure they evolve in tandem to ensure homeownership is accessible to people from all walks of life.

One area where we see a growing need for greater support is foreign nationals. The UK heavily relies on skilled workers to fill acute labour shortages, particularly in sectors like healthcare and IT. 

Last year, the government issued over 230,000 worker visas, up by 150% since before the pandemic.

Earlier this month, the government increased the minimum salary threshold from £26,200 to £38,700, in an attempt to curb the flow of migration to the UK. But the need for skilled foreign workers remains strong. Indeed, the Home Office projects that over half a million ‘in-country’ visas will be granted to foreign skilled workers by 2028/29. 


Foreign nationals seeking mortgages 

Criteria searches on broker platforms strongly suggest that there is a growing appetite for mortgage solutions to serve this segment of the market. They also suggest a significant unmet demand, given brokers frequently resort to these tools for complex cases they find challenging to resolve.

The fact is, too many foreign nationals currently face significant barriers to obtaining a mortgage and settling in the UK as their home away from home. Traditional lending criteria often exclude them from mortgages currently available, requiring minimum residency periods and income thresholds that may not align with their circumstances.

The base criteria that foreign nationals must currently meet include minimum UK residency requirements of one or two years and a minimum income threshold of £50,000. Added to this are capped loan-to-value (LTV) rates, often set at 75%, making it challenging for new arrivals to meet these demands. 

As a result, many new arrivals find themselves unable to achieve their homeownership ambitions, despite their aspirations to settle and integrate into British society. 


Innovative lending solutions 

We believe it is the duty of lenders, especially mutuals, to look for ways to break down these barriers to homeownership and look for more innovative ways to help more people secure a mortgage. That does not mean watering down affordability assessments or creating sub-prime products.

Far from it. But it does mean finding a way around restrictive criteria designed to protect lenders that are creating these segments of under-served borrowers. 

Through collaboration and innovation, we can build a more inclusive and accessible mortgage ecosystem that will allow more people to call the UK their home. 

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