The provision of expat mortgages in the UK remains a niche market but specialist lenders such as the Dudley Building Society are seeing increased demand for expat products from British citizens who have moved overseas for work, retirement, or other reasons but still want to invest in property back home.
There are myriad reasons for this specialist lender growth but essentially, as the market has evolved over the years with changes in regulations, economic conditions, and the needs of expats, the appetite of the mainstream lenders for expat mortgage lending has lessened.
A key recent factor has perhaps unsurprisingly been Brexit. The larger mortgage lenders have been retreating from the market since the UK left the European Union over three years ago and the reality is that for many providers the rise in required paperwork means it is no longer viable for them to offer expat mortgages.
In addition, the mainstream lenders’ general trend towards risk aversion since the credit crisis in 2008 has made it harder for the typical expat to successfully secure a mortgage. The lack of international credit ratings penalises expats with lenders who rely on credit scoring, while currency fluctuations mean those lenders who will provide expat mortgages often take an extremely conservative approach to their lending calculations.
Unfortunately for non-residents, additional factors such as currency fluctuations, different economic certainties affecting employment and lack of international credit ratings mean that the risk is naturally higher for a borrower living abroad. The result is that for the average expat, it is more difficult to secure a UK mortgage and more time and information may be needed to ensure the process can be completed.
By comparison, at the Dudley we are comfortable with customers earning both sterling and foreign currencies, highlighting how Building Societies who don’t automatically credit score and take a more human approach to underwriting are seeing expat mortgage lending volumes continue to rise.
Feedback from brokers is that our manual underwriting means we can take on cases that other lenders can’t, while helping borrowers achieve their home ownership dreams is something we love to do. Our individual approach lets us do this and we’re placing more and more expat cases to match demand.
Flexibility is key when assessing affordability. With applicants paid in foreign currency, we use the lowest point in the exchange rate over the last three years. Meanwhile, we don’t place any restrictions on the foreign currency as long as it does not fall within any territories subject to financial sanctions or Financial Action Task Force (FATF) countermeasures. We can also accept income from one foreign currency plus income in sterling.
We provide flexibility around minimum income requirements and unlike many lenders do not require applicants to work for a multinational company. We accept applications from a range of countries and in over 160 currencies.
Expat buy-to-let and holiday let
Of course, what interests a significant number of expats is the ability to have a buy-to-let or holiday let mortgage on a property in the UK to utilise for income generation purposes. To that end, we offer expat residential mortgages with a maximum LTV of 85% and expat holiday let and buy-to-let mortgages with a maximum LTV of 80%.
By way of example, we recently helped couple who had moved abroad, wanted to keep their family home but required finance at 80% LTV. The best way to achieve this was through a buy-to-let mortgage. The main wage earner was a contract worker paid in local currency, but because they were living in Dubai, there was no income tax on earnings. As the Dudley assesses each case individually and look at affordability rather than salary, we were able to successful provide an expat buy-to-let mortgage solution to this couple.
We can be equally flexible with expats wanting a holiday let mortgage. Our approach to assessing cases individually sits hand in hand with our policy to assess rental on holiday let income and not AST income and there are no set minimum income requirements. Again, we offer up to 80% LTV and will lend to first-time buyers and first-time landlords. We also allow them to live in the property when not being let.
The UK expat mortgage market is a dynamic sector that serves the unique needs of British citizens living abroad. It is influenced by a range of factors, including global economic trends, regulatory changes, and the evolving needs of expats. As such, it presents both challenges and opportunities for lenders, brokers, and borrowers alike. Intermediaries should seek out broker-friendly lenders such as the Dudley if they want to get results in this interesting space in the market.
Rob Oliver is Distribution Director at Dudley Building Society