Since the financial meltdown a few years ago British banks
have tightened their requirements for mortgage finance. Larger deposit
requirements, smaller income multiples and increased checks on an applicant’s
financial situation are all designed to lower risk for both applicant and bank.
While there are logical reasons behind these changes, to
help avoid a similar financial fiasco, not everyone is happy of course.
Property prices in the UK have now largely recovered, meaning that they’re out
of reach for the vast majority of first-time buyers. There is a risk that the
meltdown has created a generation on renters, stuck as they are without the
income or deposit to buy into the UK property market.
Now however it seems there is one more group finding
themselves left out in the cold; namely expats. In the past a wide range of UK
banks and specialist mortgage lenders were willing to lend money to expatriates
seeking to purchase a house in Britain.
Strong finances and a long work history
were normally enough to convince UK banks that you were a reliable borrower who
could be trusted. And if you weren’t, the rapidly-rising property market still
meant there was a fair chance of the bank making money if a property had to be
repossessed and resold.
Now though things have changed. Lenders are more fidgety
than ever before about lending money to anyone but the most qualified
individuals. Sadly expats who have been living and working outside of the UK
will find that their credit has suffered, making them appear as ‘high risk’ individuals.
According to recent statistics, there were 19 mortgage
lenders actively doing business with expats in 2004. These days that figure is
down to 7. That means that twelve mortgage lenders have either gone out of
business or changed their rules enough so as to not service expat buyers.
The choice of just seven lenders means little competition in
the market. The knock-on effect is that mortgages for expats – if they’re
approved – can be far more expensive than mortgages for UK residents with established
credit and employment histories.
As one final nail in the coffin, some of these few remaining
lenders focus specifically on buy-to-let mortgages. This further rules them out
if expats are seeking to relocate to the UK in order to live; they’ll be contractually
prevented from moving into the very house they bought.
Interestingly, at present overseas investors are currently
not required to pay capital gains tax on any money they make when they sell a
UK property. However, this is all set to change in 2015 when a new rule comes
into force requiring payment just as is expected of UK citizens.