Every month, more lenders announce changes to their foreign national mortgage criteria.
These include increasing loan to values (LTVs) from 80% to 90%, reducing minimum income requirements from £75,000 to £50,000, more flexible approaches to visa requirements and dropping the length of residency in the UK.
In the latest instalment of our lowdown series, Mortgage Solutions investigates the most important changes in the foreign national mortgage market so far, what’s driving them, broker opportunities and where the market should head next.
What’s a foreign national mortgage?
Anyone moving to the UK from overseas to work or study who wants to buy a home needs a foreign national mortgage.
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Currently, 36 lenders accept foreign nationals, while 43 do not, according to analysis from broker Tembo.
Mortgage lenders have historically insisted that borrowers have at least a 25% deposit and a high level of household income in the region of £75,000. One or both applicants would have needed indefinite leave to remain (ILR) status or worked in the UK for five years to build up a credit history.
But over the last 18 months, that’s all changed.
What’s been happening?
Nottingham Building Society was one of the first lenders to make a bold move in this space in May last year, among a handful of other smaller lenders beginning to loosen restrictions on overseas workers. The lender extended its LTV to 90% with no minimum time left on a visa or minimum income.
More recently, the launch of Afin Bank in July, which is a lender set up solely to help foreign nationals – particularly people from the African diaspora – has put this segment of the market firmly on the map.
Notable improvements have also come from Nationwide and Accord, with their higher LTVs for applicants with no ILR, and Clydesdale Bank has made the decision to stretch to 95% LTV with no minimum income. Vida launched into the market, while Suffolk Building Society and GB Bank both made improvements to their criteria.
Darlington Building Society also now lends up to 95% LTV with no minimum income stipulation.
Where minimum income restrictions are in place, some lenders have reduced them to £50,000.
Why are lenders changing their foreign national mortgage criteria?
Meeting the rising demand of skilled overseas workers coming to the UK on visas to make a life here has fuelled the changes in lender appetite and, subsequently, the loosening of criteria, according to those working in the sector.
With the UK’s population projected to rise by about 4.9 million between mid-2022 and mid-2032 – growth that is expected to come entirely from net migration, according to the Office for National Statistics (ONS) – the need for lenders to help customers who come to the UK to work will only increase, says Matt Kingston, sales director at Nottingham Building Society.
There is a particularly acute need from foreign national mortgage borrowers in sectors such as health and social care, where demand is critical.
Kingston says: “For many years, the EU was the main source of work-related migration. Post-Brexit, non-EU migration has risen significantly, and with it, the need for lenders to adapt.
“We’ve seen steady demand from foreign national borrowers, with the most common nationalities being Indian and Nigerian. The majority of applications fall within the 80-90% LTV range, with an average loan size of around £250,000.
“Nearly half of applicants are aged between 30 and 40, and most have been living in the UK for up to two years.”
Accord says it made changes to its criteria following broker feedback and data insights.
Searches for ILR have consistently ranked highly on criteria sourcing platforms, according to Andrew Calder, corporate account manager of intermediary distribution at Accord.
And the lender’s sales team is regularly reporting strong demand from the broker community for broader options in the foreign national mortgage market.
Richard Dana, chief executive of Tembo, thinks the changes that affected EU workers who were required to work on Skilled Worker visas post-Brexit have also driven lenders’ criteria changes.
However, he has long thought that not serving the foreign national market better has been a “missed opportunity” by the banks.
“If you ignore the fact they’re on a visa, the risk profile of foreign nationals is lower [than domestic borrowers] because they often have employed, steady income, rather than earnings from self-employment.
“They have a higher average household income of £93,000 across our book, compared to £68,000 for other applicants, and a lower loan-to-income ratio of typically 2.7 times versus 3.4 times,” he notes.
Foreign national opportunities for brokers
As criteria are loosened and some restrictions are lifted, naturally there are more opportunities to help foreign national mortgage borrowers who haven’t lived in the UK for long or have a lower deposit.
But the complexity of lender criteria and flurry of changes also creates an opportunity for brokers, says Anthony Rose, co-chief executive of brokerage LDN Finance.
“Those with more complicated employment and visa statuses often will have a stronger need for independent advice than a standard borrower, due to the difference in lender criteria and the changes we have seen over recent months,” he adds.
Alan Davison, chief commercial officer for Afin Bank, says brokers can create opportunities by getting out into communities and meeting potential borrowers face to face. That way, they can educate them on how the UK mortgage system works and the eligibility requirements.
“My advice to brokers is to try and connect with communities, understand the issues they’re dealing with and find out how they can support them,” he says.
Holding mortgage clinics near NHS trusts or large tech employers can help to create new relationships with potential clients.
Jean Carlo Gonzales, broker and owner of Mi Casa Mortgages, has built his whole business model around helping the UK’s Spanish-speaking community buy a home and settle in the UK.
“I migrated from Peru to the UK in 1999, worked in Santander Bank, and later founded Mi Casa Mortgages in 2020 to address the challenges I saw foreign nationals facing.
“As a migrant myself, I understand first-hand the barriers from language and cultural differences to navigating a financial system that can feel overwhelming for those new to the country. To address this, I created a model that delivers advice in both English and Spanish, supporting clients through every step of the journey, from affordability checks to completion. Beyond brokerage, I also develop educational resources – guides, workshops, and online content – to empower families with financial knowledge,” he says.
Read: Embracing foreign national opportunities by Christopher Blewitt, Darlington Building Society’s head of intermediary distribution.
Challenges in the market
A lack of credit history is one of the main challenges in the market and the reason that many lenders insist on a minimum of one year’s residency in the UK or impose a higher deposit requirement on borrowers with no credit history.
However, some lenders are innovating to get around this challenge so they can lend to borrowers without imposing any minimum residency restrictions.
Nottingham Building Society has partnered with Nova Credit, which allows it to import overseas credit files for applicants. Afin Bank, meanwhile, doesn’t base its lending decisioning on a credit profile or score.
Keeping abreast of lender criteria changes is the biggest challenge its brokers face in this market, says LDN Finance’s Rose.
To manage this, the broker team has regular face-to-face and virtual meetings with the business development managers (BDMs) to discuss the latest enhancements and what they mean for borrowers.
And for brokers inexperienced in the foreign national market, some of the extra requirements – such as dealing with gifted deposits from family who live overseas – can seem daunting.
Davison says brokers shouldn’t be put off, as these differences often just require an extra layer of due diligence that lender BDMs are happy to guide them through.
Where next for foreign national mortgage lending?
As demand for mortgages from applicants on visas rises, Davison expects to see more competition in this market.
“When you think there’s 10 million foreign nationals living in the UK, that’s a big under-served market. We’ve seen seven or eight lenders come out in the last three months to say they support foreign nationals, such as Hinckley & Rugby, Accord and TML.
“This helps to spread the message that there’s a segment of customers in the UK struggling to purchase a property who are stuck in a rental nightmare.
“So I think more lenders opening up into this space will create more choice for brokers,” he says.
Dana, while pleased at the changes to criteria seen this year, wants to see continued improvements.
He says while one lender may have upped its LTV to 90%, it enforces a high minimum income restriction, or another lender with flexible residency rules imposes a high deposit limit.
“There’s still quite a way to get to the dream product, which would be 95% LTV, one year in the country and £40,000-50,000 minimum income, all from the same lender.
“And I think there’s still opportunities for lenders to take more of a view on people’s roles and what they’re actually doing professionally in order to give them the opportunity to buy a home sooner,” he adds.
