Expats are becoming mortgage prisoners in the UK as banks and building societies are turning them away.
Refinancing a home or investing in a buy to let property is becoming harder as mortgage lenders tighten affordability tests under orders from the Bank of England.
The controls are leaving many expats with property in the UK unable to remortgage to better rates.
British homes are also popular investments for buy to let landlords as they produce a reliable monthly income and a capital gain as values increase.
But affordability changes have left many expats out in the cold even though they may have enough cash for a deposit to buy.
Locked out of market
Instead of asking for the monthly rent to exceed an interest only mortgage payment of 5% by 125%, lenders now want to see the rent cover the mortgage payment by 145%.
Thousands of buy to let landlords are locked out of remortgaging by the move as their rents covered mortgage requirements when they bought the property up to a decade ago, but no longer do so.
“Foreign nationals from the Middle East, Asia, Europe and the US. as well as British expats residing in those destinations are a hugely important demographic for the UK’s property market.
“Quite sensibly, they view British property as a safe haven asset and, due to the relative weakness of the pound, it has become more attractive in recent times,” said Darren Mead, head of mortgages with expat mortgage broker and IFA deVere Group.
“In our experience these buyers, without seeking quality advice first, are finding it increasingly difficult to purchase property in the UK, often being turned away by mainstream, high street lenders.
“Expats have been typically deemed as ‘higher risk’ by UK lenders, even if they have substantial assets and a high salary.”
Mead explained that expats applying for mortgages may be unaware of the affordability changes and approach lenders who will reject their applications.
“It is therefore highly recommended that expats and overseas buyers looking to buy property in the UK seek advice from cross-border specialists who have well-established relationships with UK lenders. They will be best-placed to help clients meet the stringent criteria in what is becoming an increasingly strict mortgage environment,” he said.