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Brokers have reported an increase in expat mortgage enquiries over the past few months as borders reopen and Covid restrictions are rolled back, with expectations for the market will grow more in the near future.

Anthony Rose, co-chief executive of LDNfinance said it had seen a “healthy increase” in expat mortgage enquiries, and said when it compared increasing enquiries against timelines it could be attributed to post-Covid borders opening up with looser restrictions on international travel.

Daniel Yorke, managing director at Expat Mortgages UK which is specialist division of Commercial Finance Network, said it had seen a “gradual increase over the past 12 months” but this had become more pronounced over the past three months.

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Chris Sykes, associate director and mortgage consultant at Private Finance, added that expat enquiries had fallen during the pandemic due to travel restrictions, but there had been an “uptick” in such enquiries in recent weeks.

According to figures from Knowledge Bank, expat residential searches increased by seven per cent from 2020 to 2021, and 16 per cent for buy-to-let (BTL) searches over the same period.

Matthew Corker, operations director at Knowledge Bank said it had 24 categories covering various criteria and it had been growing them as expats looking for UK properties had risen.

Corker said: “While the growth has been steady in residential searches, there has been a significant increase in ex-pats look for BTL properties. Partially driving this interest is the volatility in the stock market, coupled with UK house prices exceeding all growth expectations.

“Lenders are also reacting to this trend and there have been more and more adding products for expat borrowers. With house prices and rents looking set to keep increasing, we anticipate this growth to continue in 2022.”

Primis’ figures for Q4 also show that expat lending, which includes residential, BTL borrowers and foreign income lending, grew in Q4. This was partially attributed to the return of high loan to value (LTV) BTL mortgages for expats and a softening of criteria to apply for these products.

Yorke said there were multiple factors in the increase in enquiries, which included Covid-19 becoming more normalised, interest rates staying “exceptionally low”, Brexit leading expats to return to the UK and the UK property market’s strong growth and activity.

Sykes said he believed the growth in enquiries was due to the UK’s “light touch approach to Covid” in terms of restrictions, which meant it was the “least restrictive place in Europe”.

Rose added: “Most of our enquiries have been expats returning to the UK looking to buy, or they’re refinancing their existing UK properties. However, we have also noticed that the end of the stamp duty holiday and strong property market post-Covid has played a vital role in clients obtaining expat mortgages for BTL properties.”

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Challenges of lender choice and case complexity

Rose said one of the biggest challenges for brokers in sourcing expat lenders was the number offering suitable products.

He explained: “It’s a small, niche space which can involve placing square peg clients in round holes. Often, expats have bespoke circumstances that require providers to have a flexible approach to lending.

“A classic example is intended date of return home; some lenders require a specific date whereas others need some ballpark timelines. Naturally these times can change so it’s difficult for clients to pinpoint precisely. Lenders need to be mindful of this.”

Sykes said another issue was the “very manual process” to find a lender for an expat mortgage.

He said lenders needed to consider more factors such as what country the client is a resident in, what country they are domicile and pay tax in and what currency they are paid in.

Sykes added that some lenders needed borrowers to be employed at a “blue chip company” earning £50,000 or more, whereas others were more flexible on earning structure.

He also noted that along with the added complexity, some brokers would not have relationships in place with international and expat lenders to source the most competitive expat mortgage deal.

“If you don’t know who you are asking to narrow down these products then you cannot quote the most competitive deal,” Sykes said.

Yorke said on the biggest challenges were the increase in interest rates and LTV reductions which made it harder for expats to borrow money.

He added: “Complicated income structures make it harder for clients to be able to secure funding, or at least at the level they would ideally hope for. We overcome this by working closely with our clients to help educate them and make aware of exactly what documents & figures the lenders will need for an application.”

Expat mortgage market expected to grow post-pandemic

Sykes said that expat enquiries had fallen during the pandemic due to travel restrictions but it “remains to be seen” if there would be a return to pre-pandemic levels or if there is a “great deal of pent-up demand” after two years of restrictions in the UK and globally.

However, he added: “We do now see this as an area that we expect to grow post-pandemic, especially as London returns to life and with prices having stagnated in the capital, this could be an attractive time for expat buyers and importantly investors.”

Yorke said Expat Mortgages UK received over 20 expat mortgage leads per week and it planned to double this volume in the next six months and double it again in the last six months of the year.

He continued that it was a growing market as expat mortgages tended to have high value properties and loan values. He also said expat mortgages encouraged a deeper relationship with the client and there was less competition in the market.

Sykes said the average size of an expat case was usually higher than a normal first-time buyer case due to the increased complexity.

Rose said despite the lengthy and complex process of an expat mortgage the “job satisfaction” advisers got from completing these mortgages made it “worth the time and effort”.

He added: “Each client has a unique story to tell which keeps our job interesting and exciting. In delivering an excellent service, we can also benefit from the referrals we receive off the back of them.”

He also noted that clients who used LDNfinance for an expat mortgage were more likely to return when it came to remortgage their UK residence when they returned home.

By Anna Sagar

Source: Mortgage Solutions

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