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Opportunities and Advantages in the UK Property Market for Expats and Foreign Nationals

The UK property market remains a highly appealing destination for expats and foreign nationals seeking to invest or establish a new home. The United Kingdom has plenty of diverse cities, a thriving economy, and an appealing cultural heritage, the country offers a unique blend of investment potential and lifestyle appeal. This attractive combination presents plenty of purchasing opportunities in terms of residential or buy-to-let properties using specialised mortgage providers like Expat Mortgages UK.

Current State of the UK Property Market

While the UK property market has historically been strong, recent data suggests that it is currently facing some challenges and underperforming. According to the latest figures from the Office for National Statistics (ONS), the average UK house price was £285,000 in December 2023, which was £4,000 lower than 12 months previously. This marks a significant slowdown from the steady growth witnessed in previous years and has raised concerns among investors and homeowners.

One of the primary drivers behind the market’s downturn is the interest rate hikes implemented by the Bank of England to combat inflation. Rate increases have made mortgages less accessible, pricing out many potential buyers out of the market and dampening demand. The cost of living crisis has also inflamed the situation, as households struggle to manage rising costs and have less disposable income available for property investments or purchases.

While the national average paints a gloomy picture, the impact of the market downturn has been uneven. Areas like London and the South East, which have traditionally been property-buying hotspots, have experienced more significant price declines compared to regions like the North East and Scotland. Amidst declining consumer confidence, many buyers are being cautious, adopting a “wait-and-see” attitude, before committing to any large property investments.

Expat Mortgages UK

Opportunities for Expats and Foreign Nationals

Despite these challenges, the current conditions may present opportunities for those with strong financial positions and long-term investment plans. Softening prices and reduced competition could allow them to secure properties at more favourable valuations. This could offer good returns on future growth when the market rebounds.

However, navigating the current UK property market landscape requires careful consideration and expert guidance. Expats and foreign nationals would be well-advised to work closely with specialised mortgage providers like Expat Mortgages UK, who can provide tailored advice and strategies to mitigate risks and capitalise on opportunities.

Those wishing to establish a new home or explore investment avenues in the UK can take advantage of the following:

Residential Mortgages

Residential mortgages can used to purchase a dream home in the UK. With the right guidance and support from specialised mortgage providers like Expat Mortgages UK, the process of securing a mortgage can be streamlined, taking into account their unique financial circumstances and income sources.

Buy-to-Let Mortgages

The UK’s thriving rental market offers lucrative opportunities for property buyers to invest in buy-to-let properties. With steady rental demand and attractive yields in many areas, these investments can generate significant passive income and long-term capital growth.

Currency Advantages

For people earning income in currencies other than the British pound, currency fluctuations can work in their favour. A weaker pound can make UK property more affordable, amplifying their purchasing power and potential returns on investment.

Diversification

Investing in UK property can serve as an effective diversification strategy, allowing investment portfolios to be spread across different asset classes and markets.

Benefits of Residential Mortgages for Expats

Securing a residential mortgage in the UK can be a complex process, but potential property buyers who wish to invest can work with an experienced mortgage advisor to take advantage of: 

Tailored Mortgage Solutions

Mortgage providers that understand the unique financial circumstances of expats and foreign nationals can offer tailored mortgage solutions that cater to specific needs and income sources.

Access to Competitive Rates

By working with a wide range of lenders and having whole-of-market access, property buyers benefit from competitive interest rates and favourable mortgage terms.

Residency Flexibility

Many expat mortgage providers understand the transient nature of expat life and offer flexible residency requirements, allowing clients to secure mortgages even if they plan to relocate in the future.

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Advantages of Buy-to-Let Mortgages for Expats

Investing in buy-to-let properties in the UK can be lucrative, and securing a buy-to-let mortgage from an experienced mortgage company offers several advantages:

Maximised Rental Yields

With their in-depth knowledge of the UK property market, mortgage providers can help to identify areas with high rental demand and attractive yields, maximising their investment returns.

Tax Efficiency

Experienced mortgage providers can guide clients on tax-efficient strategies for buy-to-let investments, helping buyers maximise their returns while complying with UK tax regulations.

Property Management Support

Some providers offer additional services, such as property management and tenant screening, making it easier for expats and foreign nationals to manage their buy-to-let investments from abroad.

Other Things to Consider

Apart from securing the necessary funds and mortgage instruments, there are also some other things that foreign nationals and expats need to be aware of before purchasing a property in the UK. 

  • Legal and Regulatory Considerations Navigating the legal and regulatory landscape in the UK can be complex. It’s essential to understand the various laws and regulations governing property ownership, rental agreements, and landlord-tenant relations. 
  • Property Management Challenges When investing in buy-to-let properties, managing the properties from abroad can be a significant challenge. 
  • Long-Term Residency Plans Expats and foreign nationals should consider their long-term residency plans when investing in UK property. If they intend to eventually relocate to the UK, purchasing a residential property can be a wise investment. However, if they plan to remain abroad, buy-to-let properties may be a more suitable option. 
  • Exit Strategies While investing in UK property can be lucrative, it’s essential to have a well-defined exit strategy in place, such as selling the property outright, refinancing, or transferring ownership to family members or trusts. 

For those seeking to invest in a UK residential or buy-to-let property, working closely with Expat Mortgages UK will help expats and foreign nationals navigate the UK property market with confidence and expert guidance.

Contact Expat Mortgage Broker today for Free Foreign National and Expat Mortgage Advice.

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BTL mortgage drought hits UK expats

A growing number of UK homeowners working overseas are finding themselves grappling with skyrocketing mortgage rates when renting out their properties, the Financial Times reports.

The newspaper says that these individuals are often required by lenders to switch from standard residential loans to ‘consumer buy-to-let mortgages’ – usually at higher interest rates.

In recent months, these rates have experienced a sharp increase, fuelled by the expectation that the Bank of England will push up rates to tackle inflation.

The situation is further complicated by the falling number of products in the expat mortgage sector.

Banks discontinued expat mortgages in early 2020

The FT says that many major banks discontinued expat mortgages in early 2020, as the UK’s exit from the EU imposed fresh regulatory challenges for British banks providing financial services throughout the bloc.

When expat borrowers reach the end of their fixed-rate agreements and seek refinancing, they may encounter interest rates as steep as 8% or 9%, according to lenders and mortgage brokers.

Some banks have even started rejecting expat remortgage applications or requests for larger mortgages.

And while some banks continue offering mortgage transfers – where borrowers receive a new rate offer from the same lender – the rates are significantly higher than before.

Contact us today to discuss Expat Mortgages and how we can assist you.

BTL mortgage market for non-UK residents

Lorraine McLean, head of BTL mortgages at Skipton International, which is based in Guernsey, said the bank had seen strong demand from expats who had been offered ‘a ludicrous rate’ when renewing – or nothing at all.

The bank said it had seen a 40% rise in completions in the first quarter of this year, compared with last year.

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UK-based lenders lost the so-called ‘passporting’ rights

The FT article says that when the UK left the single market for financial services, UK-based lenders lost the ‘passporting’ rights that saw them to do business in any EU country with minimal extra authorisation.

One director at a major lender told the newspaper that before Brexit, lenders in the UK lending to EU or UK citizens across the EU had to show they were following lending rules in the UK.

Now they must follow the regulations in the borrower’s country of residence – and lenders don’t have the appetite or capacity to do this.

The lender was offering transfers on expat buy-to-let mortgages, the director said, but no longer offered loans to new expat customers and did not allow expanded mortgage borrowing for current customers.

Source: Property 118

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BTL mortgage drought hits UK expats

A growing number of UK homeowners working overseas are finding themselves grappling with skyrocketing mortgage rates when renting out their properties, the Financial Times reports.

The newspaper says that these individuals are often required by lenders to switch from standard residential loans to ‘consumer buy-to-let mortgages’ – usually at higher interest rates.

In recent months, these rates have experienced a sharp increase, fuelled by the expectation that the Bank of England will push up rates to tackle inflation.

The situation is further complicated by the falling number of products in the expat mortgage sector.

Contact us today to discuss Expat Mortgages and how we can assist you.

Banks discontinued expat mortgages in early 2020

The FT says that many major banks discontinued expat mortgages in early 2020, as the UK’s exit from the EU imposed fresh regulatory challenges for British banks providing financial services throughout the bloc.

When expat borrowers reach the end of their fixed-rate agreements and seek refinancing, they may encounter interest rates as steep as 8% or 9%, according to lenders and mortgage brokers.

Some banks have even started rejecting expat remortgage applications or requests for larger mortgages.

And while some banks continue offering mortgage transfers – where borrowers receive a new rate offer from the same lender – the rates are significantly higher than before.

BTL mortgage market for non-UK residents

Lorraine McLean, head of BTL mortgages at Skipton International, which is based in Guernsey, said the bank had seen strong demand from expats who had been offered ‘a ludicrous rate’ when renewing – or nothing at all.

The bank said it had seen a 40% rise in completions in the first quarter of this year, compared with last year.

Discover our Expat Mortgage Broker services.

UK-based lenders lost the so-called ‘passporting’ rights

The FT article says that when the UK left the single market for financial services, UK-based lenders lost the ‘passporting’ rights that saw them to do business in any EU country with minimal extra authorisation.

One director at a major lender told the newspaper that before Brexit, lenders in the UK lending to EU or UK citizens across the EU had to show they were following lending rules in the UK.

Now they must follow the regulations in the borrower’s country of residence – and lenders don’t have the appetite or capacity to do this.

The lender was offering transfers on expat buy-to-let mortgages, the director said, but no longer offered loans to new expat customers and did not allow expanded mortgage borrowing for current customers.

Source: Property 118

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Time to buy – UK house prices & lower expat mortgage rates

Volumes are up and interest rates stable in the UK housing market

UK-based buy-to-let mortgage broker Offshoreonline has reported its best figures for expat mortgage enquiries in March 2023 since before the pandemic. In fact, volumes are now equalling pre-pandemic levels.

“In a very short space of time, the main structural issue with the UK housing market, a lack of supply, seems to have been turned around,” says Guy Stephenson from Offshoreonline.org. “If anything, we’re now seeing an excess of supply over demand. This makes UK house prices attractive for expat home buyers. They have more choice, and sellers will be more likely to take a good offer, given the shortage of UK buyers as a result of a rise in UK mortgage rates.”

Property portals such as Zoopla and Rightmove are reporting the supply of houses put on the market is increasing month on month. The trend started in January 2023, when listings rose by 5.9%. It then continued in February with the figures rising 28%. Now, in March, the listings recorded by estate agents are up a further 17%, according to Rightmove.

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Decline and recovery

Highlighting the sometimes contradictory picture in the UK housing market, Guy says, “The Bank of England began pushing the UK base rate sharply higher, mainly from August 2022. Therefore, UK mortgage rates inevitably rose steeply too. This caused a market shock, and housing demand declined rapidly in late 2022.

“Despite the headlines suggesting a demand collapse, the UK house price reports such as those produced by Halifax, Nationwide and the UK government reveal that, over time, UK house prices in the better quality areas have stood up, mainly because supply has been so limited. With strong demand chasing a very limited supply, house prices in the UK have remained firm in these areas.”

If you’re someone who held off on a buying decision, now could be a very good time to make a move. The supply of houses for sale has shown a rapid recovery, increasing choice and making the UK housing market very attractive for buyers. At the same time, major mortgage lenders have released lower expat mortgages rates in the UK.

The Birmingham Bounce

Offshoreonline quotes the example of a client based in Singapore who, having spent months searching for an investment apartment, finally reluctantly put an offer on one in Birmingham at just over £200,000. The flat came with a tenant in situ, but when the service and ground rent costs were factored in, eventually they concluded it didn’t make financial sense.

Having spent most of 2022 house hunting, they therefore withdrew from the purchase in March this year. Within one week, they found a larger, more suitable terraced house at just below £200,000 with no service charges, which transformed the financial case for investing. The whole deal, from search through to offer and acceptance, was completed in under eight days.

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What do Singapore-based expat buyers need to get a UK mortgage?

According to Offshoreonline, there’s not only a wide choice of expat mortgage lender, but the application process is also simple. Buyers will need a deposit of at least 25% of the sale price. They’ll also need to confirm their employment status and where they live in Singapore, perhaps with a local utility bill. Apart from that, the property’s rental potential will be a key factor. Houses need to generate a minimum of £510 monthly rent for every £100,000 borrowed.

Are UK mortgage rates going up or down?

After the chaos of the mini budget in late 2022, happily, markets have settled. The UK economy is still performing well. It has avoided recession and retail sales are still stronger than most people expected. So, Offshoreonline expects the UK base rate to stay at current levels for a while.

“We’re not going to get back to the unnaturally low UK base levels seen over the last 10 years as ultimately these were due to the Bank of England intervening to offset the dramatic impact firstly of the financial crash in 2008 and subsequently the pandemic.

Whilst forecasting interest rates is virtually impossible, our view is that the long-term average for the UK now is probably a UK base rate in a range somewhere between 2.5% to 4%, or perhaps a little more, with mortgage rates around 1% above these figures. We currently have a range of lenders offering expat mortgages from 4.99% to 5.40%. So there’s a good amount of choice,” says Guy.

By Kaur Harsharan

Source: Expat Living

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The buy-to-let locations landlords can invest in for as little as £25,000

Landlords enjoyed record-breaking rental growth last year, boosting yields and putting the property market on the radar of investors looking to diversify their portfolio. But investing in the buy-to-let sector has become increasingly fraught with regulatory pitfalls and higher borrowing costs thanks to inflated interest rates.

The sector has been losing more investors than it has attracted since 2016, when a three percentage point stamp duty surcharge was introduced for additional properties. The tapering of mortgage interest tax relief on buy-to-lets followed soon afterwards.

For those willing to navigate the complex rules, buy-to-let is a familiar option which if done properly gives investors two sets of returns; rental income and capital growth of their underlying asset.

Where to start? Here, we take a look at the best places to invest with a cash budget of £25,000, enough to cover a 25pc deposit and stamp duty, using data from Hamptons estate agency.

In the three locations below, an initial £25,000 investment would produce an average gross yield of more than 9pc – significantly more than the target 4pc rate of income from a typical pension pot in drawdown.

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Where £25k will earn you the highest returns

Hartlepool and County Durham

The highest yielding location for landlords with £25,000 to spend in England and Wales is Hartlepool in north east England. Yields are generally highest where house prices are lowest. Cheaper property prices and high tenant demand in the North have boosted rental returns, making it a popular region with investors.

The port of Hartlepool is a rental hotspot for modest budgets, with an average gross yield of 9.7pc. A typical flat in the area costs £68,130, meaning landlords will need £17,030 for a 25pc deposit and a further £2,044 to pay stamp duty. They can expect an average yield of 11pc on their investment, one of the highest on this property type in the country.

Recent house price growth means an average terraced house in Hartlepool no longer falls within a £25,000 investment, but is still within reach for those who can afford to stretch their budget a little further. A typical terraced house in the area costs £95,100, requiring a £23,780 deposit and £2,853 for the stamp duty bill. It equals an upfront investment of £26,630 and would yield an average gross yield of 9.2pc.

Paul Gough of We Love Renters, a property management company in Hartlepool, said there were three main tenant demographics that landlords had targeted in the town in recent years.

Two or three-bedroom houses for families were very popular among investors, said Mr Gough, who owns a portfolio of properties in the area.

He added: “Old Victorian houses which can be developed into one-bed apartments have also become increasingly popular, as they are perfect for single male tenants. Short-term lets for contractors have also taken off in a big way.

“There has been a lot of government money directed towards the wider Teesside region over the past year and there are thousands of contractors in the area.

“These workers often live elsewhere in the country but are staying in Hartlepool for weeks at a time. They don’t want to be paying hotel prices, so short-term bedsits for anywhere from a few nights to six months are in high demand.”

Investors can expect rental income before expenses of £7,494 a year from an average flat in the town and £8,794 from a terraced house, according to Hamptons.

Next door in County Durham investors can find the second highest yields for a budget of £25,000 in the country. Landlords with a modest investment can achieve an average gross yield of 9.2pc, or higher if they invest in a cheaper property type.

The average flat here costs £76,020 according to Hamptons, more expensive than nearby Hartlepool. Landlords would need a combined £21,290 to cover a deposit and stamp duty and could expect a typical double-digit yield of 10.3pc.

A terraced house in County Durham is also out of reach to a landlord with £25,000, although possible if they have a few thousands pounds more to invest.

A property of this size costs an average of £100,880 in the area, requiring a £25,220 deposit and £3,026 stamp duty bill – £28,250 in total. Landlords renting out a typical house here can expect an average yield of 8.7pc.

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Blaenau Gwent

The borough of Blaenau Gwent has the highest rental yield in Wales for investors with a £25,000 budget, at an average gross rate of 9.1pc.

A £25,000 budget would be enough to cover the £17,660 deposit on an average flat in the area, plus £2,119 in stamp duty. Landlords can expect an average yield of 10.3pc on a flat and £7,239 in annual rental income, before any costs are deducted.

Investors would need more than 60pc more to invest in a terraced house in Blaenau Gwent, where property values have risen in recent years. At a typical price of £117,060, the upfront cost of investing in a terraced house is £32,780 to cover a 25pc deposit and stamp duty bill, according to Hamptons.

Landlords can expect higher rental income from a terraced house, an average of £10,088 a year – but yields will be lower because of the bigger initial investment, at an average of 8.6pc.

By Rachel Mortimer

Source: msn.com

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Buy-to-let mortgage repayments up 32% in the last year

The cost of maintaining a monthly buy-to-let mortgage interest payment has climbed by 75.7% in the last year, with those making a full mortgage repayment each month seeing an increase of 31.6%, according to new research from Octane Capital.

Octane Capital analysed the current cost of the average buy-to-let mortgage and how this monthly repayment has increased in the last year as interest rates have climbed.

The research shows that currently, the average buy-to-let investor is borrowing £217,364 after placing a 25% deposit on the average UK property price of £289,819.

With a current average buy-to-let mortgage rate of 5.32%, this would see the average investor pay back £1,312 when making a full monthly repayment.

The average mortgage rate has increased by 2.12% in the last year alone, meaning that the average monthly cost of a full mortgage repayment has increased by 31.6%, adding £315 to the cost of buy-to-let borrowing.

However, many buy-to-let investors will opt to simply maintain the mortgage secured on an investment property by way of monthly interest-only repayment

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The figures from Octane Capital show that in the current market, the average interest-only monthly repayment has climbed to £964 per month, an annual increase of 75.7%, or £415 per month.

Despite this increased cost, investor appetites for buy-to-let investment remains strong and previous research by Octane Capital shows that the total value of loans issued to buy-to-let investors has climbed by 12% over the last year, one of only two sub sectors to see positive movement two years in a row.

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CEO of Octane Capital, Jonathan Samuels, commented: “It’s not just residential buyers that will have shuddered at the news of an eleventh consecutive interest rate hike last week, with buy-to-let investors also seeing the cost of borrowing climb substantially.

“These increased mortgage costs will further reduce a profit margin that has already been dented due to numerous government legislative changes in recent years.

“Despite this, we’ve actually seen an increase in the total value of buy-to-let loans issued in the last year which suggests that, despite all that’s been thrown at them, the nation’s landlords are still largely undeterred and the buy-to-let sector itself remains a lucrative one for those looking to invest in the right areas and with the right financing in place.”

By ROZI JONES

Source: Property Reporter

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Suffolk BS enhances expat and buy-to-let criteria

Suffolk Building Society has announced a series of product and criteria changes to help brokers place more complex cases for their landlord and expat clients.

Expats and non-UK nationals

Suffolk Building Society will accept applications from first-time buyer expat landlords who are working and residing abroad and who have not owned a property before but who wish to purchase a rental property in the UK.

The Society will no longer require returning expats to spend a set amount of time in the UK before applying for a mortgage. It’s common for lenders to require anything up to two years on home soil but this change allows expats to apply as soon as they return. This applies to both employed and retired applicants.

Non-UK nationals will also be accepted on a joint application where one applicant is a UK national. This means that the non-UK partner can now be named on the mortgage. However, brokers should be aware that affordability will be based solely on the UK national applicant’s income only and they will be required to meet all relevant criteria.

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Support for UK landlords

As well as accepting first time-buyer expat landlords, Suffolk Building Society will now consider applications for first-time buyer buy-to-let properties in England and Wales. Full buy-to-let criteria will be applied including interest cover ratio (ICR) and minimum income. The Society will also run a background affordability assessment.

Landlords wishing to purchase or remortgage their own residential property will now be considered regardless of how many buy-to-let properties they have in the background, as long as the buy-to-let portfolio is self-financing. Previously, the Society had a limit of 10 buy-to-lets in the background but this criterion has now been removed to help landlords.

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Charlotte Grimshaw, head of intermediary relations at Suffolk Building Society, said: “We know our niches extremely well and have a very good understanding of the issues facing brokers in these markets at the moment. It matters to us that we’re there to support those whose circumstances means they need a specialist lender on their side – particularly as everyone faces the uncertainty of the current economic climate.”

By ROZI JONES

Source: Financial Reporter

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London rental properties letting within minutes

One lettings agency in London says that tenant demand is so great in the capital for rental properties that many homes are being let within minutes of becoming available.

Benham and Reeves point to demand created by the return of professionals and international students, along with the growing shortage of available properties to rent, for creating a ‘challenging market’.

Tenant enquiry levels have continued to increase over the summer, across the firm’s 19 branches.

They say this is the ‘Most competitive London rental market that we have ever known’.

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Many branches have had almost no stock
In addition, tenants are finding that many branches have had almost no stock available, at best one or two apartments available to rent.

In a market update, the agent says: “Many properties are renting within hours – and some within minutes – as applicants immediately make an enquiry as soon as a property goes live on our website.

“This is swiftly followed by a full asking rent offer and once agreed, a holding deposit – so anxious are they to secure a property.

“This of course is great news for buy-to-let investors who, in many parts of the capital, are seeing their rental properties let immediately with voids at an absolute minimum. Sometimes just a day or two.”

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London is now a ‘landlord’s market’
The update also makes clear that the imbalance between supply and demand means that London is now a ‘landlord’s market’ with property investors expanding their property portfolios.

And rents are rising to pre-pandemic levels – some are now 10% higher.

Investors from overseas are also finding that the weakness of sterling makes London property considerably more affordable, while the shortage of rental properties means demand is the highest that the agent ‘has ever seen’.

Professionals returning to live and work in London, along with international students, are fuelling demand.

In some areas, including the City and east London, around 85% of applicants have been international students.

With the rental market so competitive, tenancy renewals remain at an all-time high – often more than 90% of existing tenants are renewing because they see there is a limited choice of properties available.

Source: Property 118