Luther Yeates, head of mortgages at Bristol-based broker firm UK Expat Mortgage, said it was seeing an increase in expat BTL investment.
He explained: “More Brits are moving abroad for higher salary opportunities and want to make their extra income work for them back home – in a property market they’re familiar with. There is healthy demand from Middle Eastern countries, where strong and growing economies typically offer skilled, high-paid work. The dollar’s general strength against sterling has also increased their purchasing power year-on-year since 2004.”
Yeates noted that the highest volume is for family homes, usually with one adult working overseas while their partner and children remain in the UK.
“Strong tax-free earnings abroad are a key factor. Often, their motivation is securing a future residential home for their eventual return to the UK and look to rent it out in the meantime.
“These family homes aren’t always ‘optimised’ for rental contracts like a typical buy-to-let property is, but the UK market is attractive here due to relatively low rental yield requirements for buy-to-let mortgages, in terms of the income coverage ratio (ICR) required,” he said.
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Yeates said top slicing also reinforced the market’s attractiveness, as the overseas salary was put to work, even if it is in a foreign currency.
He said that from a lender perspective, it was a “mixed market” as some lenders struggle to work with the “nuances of different countries”, citing P.O. box postal systems or revolving employment contracts that differ from permanent contracts in the UK as potential stumbling blocks.
“The biggest challenge is that there are no reliable timescales. Some applications can take a week, while others can take months. Some lenders become a no-go purely from a service perspective, so it’s important to trust your experience,” Yeates said.
Criteria Brain’s search indicates that of the 78 lenders listed for expat BTL mortgages, around 58% said they couldn’t consider BTL applications from expats.
Yeates said the trend is “likely to continue indefinitely unless remitted earnings become liable for UK tax”.
“In terms of expat culture, one [trend] I don’t think we’ve seen the full effects of in the mortgage market yet is digital nomads – those who are working fully remote, often self-employed, and choosing where to live in the world. It’s still a fairly young trend, but growing,” he added.
What are the key challenges/opportunities that brokers have to be aware of?
Chris Sykes, technical director at Private Finance, said expat BTL was “somewhat back – in a way”.
He said: “Over the last few years, it has been hard for landlords across the board, and we’ve seen lower buy-to-let mortgage numbers over the last couple of years compared to before rates increased.
“For expats: higher rates, more restrictive stress tests, and the other problems that onshore landlords face are all even more restrictive for expats. Expat mortgages often come at a premium of around 1% versus standard buy to lets in the UK; this is a mix of lenders having specialist ranges for expats and having to go to more specialist lenders to get a mortgage in the first place.”
Sykes said that as stress testing was the main way lenders calculate how much can be borrowed, having higher rates means expat BTL deals can be more “restrictive”, meaning “some haven’t been able to invest as they would have liked to”, so there could be pent-up demand.
“With rates now in a more stable and decent position, expat buy-to-let is looking more attractive again as a market,” he said.
Expat BTL: The lender perspective
Claire Askham, head of mortgage sales at Buckinghamshire Building Society, said the expat BTL market “remains resilient and we’re seeing increased appetite, particularly in regions further North, where rental yields and capital growth potential are drawing more attention”.
She noted that the firm was seeing a steady rise in enquiries from expat borrowers and many are exploring limited company structures for their portfolios.
“What’s particularly interesting is the mix of borrower profiles. Some are first-time landlords who want to retain their UK property while working abroad, ensuring they have a home to return to and income in the meantime.
“Others are more experienced landlords who are actively growing their portfolios, often purchasing from landlords exiting the market. This shift is creating fresh opportunities for investors who are in a position to move quickly,” Askham noted.
She said softening interest rates were “starting to unlock options for landlords who may have been stuck with their current lender due to ICR constraints”.
Askham said rates were becoming more competitive and there was renewed interest in refinancing and growing portfolios, especially from those who had previously paused activity.
Robert Oliver, Dudley Building Society’s distribution director, agreed that the expat BTL market was resilient but noted that the market had seen challenges such as Brexit, Covid-19, and cost-of-living pressures.
However, there was a rising number of British expats, which has grown from around 4.7 million in 2011 to over five-and-a-half million today.
If you are interested in keeping up to speed with the BTL sector, you can register for the Buy to Let Event here. There are events across the country in Salford, Birmingham, London and Cardiff.
