The Impact Of Brexit On The Expat Mortgage Market

Liquid Expat Mortgages
Three weeks on from the EU referendum, Liquid Expat Mortgages assess the likely impact of Brexit on expat mortgages for UK property.


After months of debate surrounding the EU referendum, the possibility of Brexit has become very much a reality. As Britain begins to detangle itself from Europe, investors are watching the markets with an eagle eye on a minute by minute basis to determine how they will react to the pending divorce of the UK and the EU.

Following the referendum result, some expat investors have expressed concerns about their ability to secure mortgages – both in the UK and globally – in this new political and economic landscape.

However, if we remind ourselves that investing in property has always been viewed on a long term basis compared to sentiment – which can be volatile and change on a daily basis – other investors view these conditions as a key buying signal, and hence are looking to purchase more UK property in the imminent future.

Two weeks on, Liquid Expat Mortgages examine the impact of Brexit on the mortgage markets, and the likely changes to come. This review attempts to provide some perspective from a mortgage point of view.


Business as usual

Brexit may have created a tremendous amount of uncertainty for a portion of UK residents, but looking beyond the British bubble, it’s really business as usual for many property investors buying into the UK property market. This is especially so for British expats who are looking for UK mortgages. As one of Liquid Expat’s most prolific property investor clients commented this week: “Brexit is old news, it’s back to making money!”


From a mortgage perspective, nothing really has changed; Liquid Expat still has access to the same mortgage products, and even has access to a new lender entering the market days after the Brexit vote.


In the meantime, an expat’s ability to secure finance will remain the same; this is coupled with certainty that the UK base rate will remain at historical lows for the foreseeable future, with an imminent base rate reduction to 0.25%. When we remind ourselves that property has and always will be considered as a long term investment, this is a very favourable factor to consider in making new purchases.


With the announcement that Britain is to leave the EU, many expats believe this may actually work in their favour when purchasing property in 2016. Since the exit vote, Liquid Expat has seen a large increase in enquiries from expats in Hong Kong and the UAE, who have been incentivised with the immediate buying advantage of converting |their overseas income and savings into a weakened pound.


In any event, with strong demand for housing in the UK, market fundamentals haven’t been negatively affected from a mortgage perspective. This outlook is very much echoed by all the lenders Liquid Expat work with, including new lenders who have approached our brokers to access the expat mortgage market. Furthermore, the Bank of England have relaxed adequacy controls over the banks to encourage them to increase lending to borrowers, including expats.


Opportunities on the horizon

Many UK residents watched in horror as the value of the Pound tumbled against the Dollar after the EU referendum. However, as the 5th largest economy in the world, with a much stronger infrastructure than it had entering the 2008 banking crisis, the UK will continue to be a hotspot for investors worldwide who are taking advantage of the weakened pound.


For expats working in countries where payments are made in US dollar-linked currencies, the drop in the Pound has come as a welcome relief. Expat investors can now take advantage of a huge boost to spending power when purchasing property in the UK, meaning property prices are effectively discounted.


To put this in perspective, the fact that the Pound is down against the Dollar by 10% since the Brexit vote means that an expat purchasing a property in the UK for £150,000 would in fact be saving £15,000 in this new climate.


It goes without saying that this will reinvigorate interest in the UK property market amongst global investors. The anticipated cut to UK interest rates will also put pressure on the value of the Pound, as well as reducing mortgage rates to further stimulate expat interest in the market as lenders fight more competitively for the new business.


“The impact of the Brexit vote hasn’t had a negative impact on the expat mortgage market; in fact, UK investors stand to benefit from currency fluctuations and de-regulation, both in the short and long term”, says Stuart Marshall, Director of Liquid Expat Mortgages, speaking two weeks after the referendum.


Longer-term changes to UK expat mortgages

The expat mortgage market received increased currency regulation in March 2016, when the EU Mortgage Credit Directive (MCD) came into effect to regulate mortgage activities in member states. This has reduced competition, as a number of lenders (including Natwest & Halifax) withdrew from the expat mortgage market as a result.


An independent UK would no longer need to comply with this framework, abiding instead by the already stringent guidelines of the FCA. This, in the longer term, would encourage competition, improve choice, and therefore make finance more accessible for more expats investing in UK properties.


Beyond the mass hysteria surrounding the UK’s vote to leave the EU, it’s clear that very little has changed in the expat mortgage market as a result of Brexit. As a leading provider of mortgage solutions for investors worldwide, Liquid Expat Mortgages is ideally placed to advise on the opportunities.


For more information about finance in the post-Brexit climate
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