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Good times, bad times for expat buy-to-lets

by: Richard Wachman
  • 06/09/2017
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Skipton Building Society’s international arm reports it has lent over £200 million on UK buy-to-let properties for British expats since 2014, but one market commentator warned of uncertainty ahead.

Rachel Springall, a finance expert at Moneyfacts said some buy-to-let investors were already being hit by the plunge in the value of sterling – especially if their pensions were being paid in pounds.

She said: “The poor exchange rate could be the difference between earning enough or facing wafer thin margins when it comes to paying off the mortgage on a buy-to-let. On top of that, if UK house prices fall because of a bad deal on Brexit, or if interest rates go up to curb inflation, rental income will also decline and that margin gets even tighter.”

House price growth in the South East is already slowing and some analysts have warned of a possible correction.
But Spingall said not everyone was losing out with expats paid in a foreign currency such as the euro in “an excellent position”.

Also, if housebuilding slowed in Britain because of a weaker economic outlook, or higher input prices, it could strengthen the buy-to-let market as new supply would be choked off and rental demand would increase.
“There are uncertainties around, but there are various scenarios, as well as winners and losers,” she said.

Skipton International said it had sealed 1,000 mortgages on UK buy-to-let properties for British expats over the last three years. The Guernsey-licensed bank launched the UK mortgages in 2014 in response to the difficulties many expats faced securing loans on investment property in England and Wales.

Nigel Pascoe, director of lending, Skipton International, said the mutual has seen a substantial rise in enquiries for expat mortgages over the past year; in part due to the devaluation of the pound following the EU referendum.

To the end of May 2017 Skipton had more than double the value of enquiries for expat mortgages compared to the same period in 2016. This included a 124% rise from British expats in the United Arab Emirates, a 145% increase from British expats in Switzerland, and a 175% increase from British expats in Hong Kong.

Pascoe added: “Many British expats who had been considering investing in UK property made the most of the devaluation of sterling to use foreign savings.”

In a separate announcement, Skipton said it would fully roll out the payment of procuration fees for all broker product transfers before the end of the year. The procuration fees will be 0.30% for residential and 0.35% for buy-to-let, mirroring a current pilot scheme.

Skipton Intermediaries launched a mortgage product transfer retention pilot with two of its key distributors, Connells and London & Country, last April. This has since been rolled out to other distributors as the pilot has grown.

Skipton said: “Being very much an intermediary focussed lender, we recognise this is a hot topic of conversation within the broker market and value the work intermediaries do in advising customers on product transfers. Consequently, we believe the time is right to confirm the product transfer procuration fees that will now come into force later this year.”

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