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Expat enquiries on the rise with lenders looking to meet demand – analysis

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  • 07/06/2024
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Expat enquiries on the rise with lenders looking to meet demand – analysis
Brokers say that expat enquiries have been on the rise, with lenders increasing their product offerings and making criteria enhancements.

Anthony Rose, CEO of LDN Finance, said that the firm continued to see a “large number of expat enquiries” in this area, and it was a space that lenders, especially building societies, were responding to with “increased product offerings and criteria enhancements”.

Rose said that, following Brexit, many lenders stopped taking foreign income and reduced the countries they accepted foreign income from due to uncertainties over passporting.

He said: “Lenders have become more comfortable again in recent times with using foreign income, and more lenders have entered and re-entered the market because of this. We have also seen lenders already in this space widen the countries and incomes they are prepared to consider, which has boosted greater competition and options in this space.”

Guy Nyirenda, head of commercial and specialist lending at Altura Finance, agreed that there had been a “steady level of expat enquiries”, especially from mainland Europe and some parts of Asia.

This is different from enquiries from Dubai and Gulf States that were more dominant in the past.

“There is still strong interest in buying or retaining UK property, particularly in safe areas of London and the South East,” he said.

Nyirenda said that there were “more lenders than ever before and more entering or expanding their offering in this space”.

“Outside of the high-net-worth borrowers, which [are] typically covered by the private banks, traditional building societies are the most active in this space at the current time as lenders look for good lending opportunities with little risk and decent returns, which expat and overseas lending provide,” he noted

 

Expat lender criteria ‘moving in right direction’

Steven Morris, advising director at Advantage Financial Solutions, said that expat mortgage enquiries were on the rise, but this was in part due to lenders putting consent-to-let borrowers on standard variable rates (SVRs).

He noted that building societies tended to dominate the space, but there were some new lenders looking to grab market share.

“I think lending criteria [are] already moving in the right direction. The biggest challenge was making rent fit on buy to let due to the high rates, but recent changes by lenders in boosting buy-to-let affordability has helped no end [tax bracket based on UK income alone and lower stress rates],” Morris added.

Scott Taylor-Barr, principal adviser at Barnsdale Financial Management, said that expat mortgages can be “something of a regulatory and legal minefield, as the rules around international regulatory remits and the law that applies to a transaction [have] not been tested in a court”.

He said: “So, if a broker in London is advising a client in Dubai about a purchase in Birmingham, does the adviser simply have to comply with UK regulations and law, or is there a possibility that they could need to comply with Dubai rules too, as that’s where the client receiving the advice is located?

“Even if a legal precedent is set in Dubai that would mean this scenario is OK, that wouldn’t resolve the issue if the client was then based in Sydney, as we’d then need to know what the Australian legal and regulatory view would be. Currently, it is down to brokers and networks to work with their professional indemnity [PI] insurers and make a commercial decision on whether or not its potential risk is worth taking.”

 

More high street lenders should return to expat space

Nyirenda said that he would like to see more high street banks return to the expat market, and this would help with competition, pricing and fees, which would also help clients get the “best terms possible”.

“This seems to be a little difficult, as a lot of the high street lending process is automated, which does not work for expat cases, typically,” he said.

Generally, expat borrowers will need to provide a bigger deposit, or have greater equity than domestic borrowers. They will need to provide more paperwork than usual, as the application process is more manual. They will also currently be subject to higher rates and costs for arranging these types of mortgages than would usually be the case for domestic mortgages.

Rose said that expat borrowers should be mindful that these cases would be considered non-standard by most lenders, so consequently would have a “tightened loan to value, tighter affordability calculations, by virtue of haircuts being applied on foreign income, and higher rates”.

Morris said it was crucial for expat borrowers to ensure that they arrange their mortgage with a broker that does such mortgages regularly.

“Logistics such as lenders demanding ID certified by the embassy, UK tax calculations, even when no tax payable, or the dreaded ‘irrevocable nomination’ clause in offers, can throw a spanner in the works of the inexperienced broker,” he said.

Gaps in credit history mean expats under-served

Nottingham Building Society recently overhauled its foreign nationals range, now accepting mortgage applications from foreign nationals without a minimum requirement of time spent in the UK.

The products are aimed at expats returning to the UK and buying a home to live in.

Matt Kingston, national sales head at Nottingham Building Society, said that the firm was “going through an exciting period of change as we focus on the question of what mutuality means in the modern world”.

He said that, in 2024, borrowers were facing “potentially more challenges than ever before”, and its mortgage proposition was evolving to grow homeownership and support under-served borrowers, with returning expats being one such group.

“Research carried out at the beginning of the year revealed that UK nationals based overseas and looking to return to the UK face real challenges [in] obtaining a residential mortgage because of gaps in their UK credit history.

“This feels like an unnecessary barrier, which could potentially penalise borrowers simply because they are unable to demonstrate their creditworthiness. Our recently launched foreign nationals and returning expats proposition aims to tackle this problem head on,” Kingston noted.

He said that the mutual looked at UK credit bureau information, but through its partnership with Nova Credit, it could access data from 14 different countries across the globe.

“Alongside this, specialist underwriters will consider a range of documents to help supplement credit bureau information, helping brokers say ‘yes’ to more expats returning to the UK and buying a home to live in,” Kingston said.

 

Some views were gathered from Newspage.

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