Expat Mortgage Experts
A to Z of Expatriate Mortgages
JANUARY 2012
When International Mortgage Plans (IMP)
established their advisory service in Hong Kong twenty four years ago, the
market was dominated by a handful of international banks offering decidedly
lacklustre terms to a captive market. Loans were often conditional on a banking
relationship and the borrowers willingness to submit to mediocre terms and
equally mediocre conditional in house insurance deals.
IMP broke that mould by introducing expatriates to mutual building
societies and persuading the reluctant mutuals that expats offered high quality
lending without risk. Whilst Town & Country, St Pancras and Britannia’s
flirtation with the market were short lived Portman Building Society in taking
over the St Pancras were to offer market leading products exclusively via IMP
for over 10 years. Regrettably they too are history following their Nationwide
merger to whom expat lending is anathema.
So who are the main players in this market place and what of their strengths and
weaknesses. Here is an A-Z which whilst not exhaustive gives a good overview of
the market.
A. Abbey – aka Santander
Still unkindly but deservedly referred to
as “The Shabby”. Now under the parentage of Spanish bank Santander. Once Abbey
were bold enough to open offices aimed at expats in Hong Kong and Dubai but
these were closed during one of their frequent reorganisations. They are of
little help to expat borrowers and are particularly obstructive to existing
borrowers looking to extend their terms, or borrowing levels.
B. B M Solutions
A specialist buy to let lender now part of the Lloyds Group. Will only accept
applications from employees of international companies. Competitive rates but
offset by large arrangement fees of up to 3%.
C. Cheltenham & Gloucester
As a building society they were helpful to
expatriates although their service standards were abysmal. Since acquisition by
Lloyds/TSB they have not shown any interest in expatriate lending. Nowadays they
do not accept applications from intermediaries.
D. Derbyshire Building Society
Made a brief foray into expat lending and
deposit taking. Involvement with the Icelandic banks enforced a run for cover
under Nationwide’s ample umbrella.
E. Exhibitions – Property
As in the early nineties docklands
shakeout, plenty of expats have lost their savings at the hands of the
carpetbagging developers and agents sales forces. Northern cities are awash with
empty unsaleable, unmortgageable investment apartments. Caveat Emptor is the
order of the day and if attending leave your wallet, credit card and ideas of a
“quick buck” at home.
F. Fortis BNP Paribas
Their offices, in London and Hong Kong,
offered a second-to-none service to expatriates and foreign nationals for many
years. Their rates were slightly better than many of their bank competitors and
they were extremely helpful when borrowing was required via special purchase
vehicles, off-shore trusts and companies. They were very competitive for
multi-currency loans. After a brief return to the market place under the new BNP
Paribas ownership this lender has withdrawn from the expat market place
entirely.
H. Heritable Bank
Unfortunately another victim of the
Icelandic bank failures – part of Landsbanki. This is a shame - rather like
Fortis they were a true “niche lender”, with first rate service, sensible
underwriting and personnel who actually knew what they were doing. Whilst not
having the sharpest rates in town, they were not far off the pace and there was
plenty of add-on value to be had with this lender.
HSBC
Considering their high profile as “the
worlds local bank” HSBC are remarkably feeble in helping customers with UK
financing or refinancing. Whilst rates are competitive the bank seems so intent
on selling every other service they have to offer that mortgage help takes a
back seat. All sorts of restrictions impede the intending borrower and tales
abound of initial agreement being subsequently reneged on. Mortgages only
available to HSBC Premier customers holding £75,000 in investments/shares with
the bank.
Halifax
The mighty Halifax, once accounted for 30%
of the UK’s mortgage lending. Sadly Halifax Building Society decided they wanted
to play in the bankers big pond, but like their other building society chums,
Abbey, Alliance & Leicester, Bradford & Bingley, Northern Rock and Woolwich did
not have the management expertise to swim with the big sharks. They have spells
when they are very helpful to expatriate customers, and at other times they are
of no assistance whatsoever. Right now they are going through one of their
helpful phases, but they still insist on difficult criteria such as requiring a
declaration that the expatriate borrower will have returned to the UK within
three years from making their application! They are usually helpful to existing
borrowers needing to move or achieve further borrowing, and that stance is much
at variance with most of their competitors.
I. Ipswich Building Society
An old established (1838) UK building
society and the only one making loans of any significance to British expatriates
overseas. Now in their fifth year of expatriate lending via an exclusive IMP
deal. They are particularly competitive for family occupation lending to expats.
This can embrace many situations – parents occupying, wife/children whilst
husband stays overseas, children studying at university and siblings needing
assistance. Letting situations are also accommodated on ultra competitive terms.
Rates, terms and service are consistently ‘best buys’. This probably reflects
their mutuality existing as they do for the benefit of their members. They do
not have a need to pay dividends or obscene bonuses to their senior personnel
and directors.
L. Lloyds/TSB
They have been heavily involved in the
expatriate world via their overseas club and representation in most expatriate
centres. Years ago Hill Samuel, since acquired by Lloyds, truly had the Asia
mortgage market place ‘by the throat’. Their average lending terms can be
enhanced by the flexibility they offer with currency options and the ability to
offer loans in countries other than just the UK. Their service standards vary
dramatically in their various locations in the City of London, Hong Kong,
Singapore and Dubai.
M. Mortgage Brokers
They should be able to access the entire,
albeit limited, expatriate marketplace. They will certainly be remunerated by
the lender, via a procuration fee and this could determine the arrangement fee
they will usually charge. This could be anywhere between £250 and 1% of the loan
but a good broker should be able to save an applicant serious money. By handling
the processing of the loan proposal they can help avoid much of the heartache in
dealing with lenders who seem intent on employing sales prevention forces.
N. Nationwide Building Society
Nationwide are the UK’s largest building
society by far - an unhealthy six times the size of their nearest competitor.
They behave like the worst of the banks and are absolutely no help at all with
expatriates wanting to raise money for property finance, although they are
extremely happy to accept expatriates offshore deposit funds. In taking over the
borrowers of the Portman and Lambeth Building Societies they took on the loan
books of societies that had actually been helpful to expatriates; in Portman’s
case for many years. Whilst they have said that they will stand by commitments
to those societies existing borrowers (and so they should and must) they refuse
to allow any further borrowing for them and will not assist with changes of
property if the new property is to be let. They have recently sought increases
in interest rate from the Portman borrowers they acquired. This has been
successfully contested and their demands have had to be withdrawn.
P. Portman Building Society
Portman were probably the most competitive
provider of expatriate mortgage funds via an exclusive IMP arrangement
for over 10 years. Whilst the relationship wasn’t perfect it was better than
most. Regrettably Portman borrowers now have to suffer the indignities of
dealing with the Nationwide. At least the many hundreds who by default came out
of their Portman discounts and fixes, are enjoying the benefits of Nationwide’s
tracker rates which must be causing them considerable pain – 1.75%-2.5% are
common deals in place with no end date, and with the ability to carry on
letting. However no additional funding will be provided, and neither will a
change of property if letting is to continue. Nationwide were seeking to
increase rates by 1½% where borrowers had let for over 3 years. They have had to
retreat from this as a result of IMP and ex Portman borrowers pointing
out that they should not be disadvantaged by the Nationwide ‘merger’.
R. Royal Bank of Scotland
RBS were a major victim of the banking
crisis but they continue to offer competitive terms to expatriates. Whilst their
proposed major hub in Dubai did not materialize, and their Singapore operation
has had periods of curtailment, thankfully their Guernsey office provides an
excellent service. Whilst loans are limited to 70% of value, rates are good and
the personnel in Guernsey provide an exceptional service standard. RBS are
particularly generous when it comes to follow-on products for borrowers coming
out of their initial deals. Right now they offer a 4% Standard Variable Rate
with no early redemption penalties. In recognition of the volume and quality of
business introduced by IMP, new borrowers are charged 50% of this
lender’s normal arrangement fee.
S. Scotland
Unfortunately expatriates wishing to
purchase or refinance property in Scotland have a specially difficult time. Odd
bearing in mind the huge numbers of Scots who inhabit all expatriate centres.
Some lenders are unwilling or unable to cope with the difficulties presented by
the differing Scottish legal and purchasing systems – daft! What an opportunity
for a lender – we continue to seek one!
Stroud & Swindon Building Society
Britain’s 13th largest building society
spent two years building up a £20m. expatriate book via exclusive deals through
IMP. Their rates were best buys with a 2.3% three year discount from their
standard UK buy to let terms. Obviously they found servicing expatriates too
difficult, as lending terms have been withdrawn, and they can now watch their
£20m. book walk away as the exclusive deal had no early repayment penalties.
IMP have special remortgage arrangements in place, some with free or
discounted valuation and legal fee offers.
Stroud & Swindon have recently been taken over by the Coventry Building Society
who are thankfully taking a more realistic view in retaining the remaining
borrowers who have not already refinanced elsewhere.
T. The Mortgage Works
Previously a subsidiary of Portman B S,
now Nationwide. Their propositions were focused on buy to let lending, including
loans for expats. Whilst their rates were not the keenest, they did have a whole
range of products and at one time were able to provide an excellent service.
They no longer lend to expatriates and are particularly unhelpful with existing
expatriate borrowers in line with Nationwide’s stance.
W. Websites
The expatriate homeowner buyer and
borrower are newly empowered! They no longer have to rely on the sales pitch of
the far away agent or developer and can consult specific websites, which will
tell them the comparable sale prices of properties adjacent to that of their
interest and environmental information, including the likelihood of flooding in
the area of their interest.
www.google.com For mortgages there is no need to look further than Google, using
the key words, expat mortgages, expatriate mortgages and expat buy to let.
www.google.com For mortgages there is no need to look further than
Google, using the key words, expat mortgages, expatriate mortgages and expat buy
to let.
www.zoopla.co.uk A new and very comprehensive property price
comparison site.
www.nethouseprices.com This will let you know the sale prices
property has achieved in the road that you are looking at. These prices are the
actual figure paid as registered by the UK land registry.
www.homecheck.co.uk With a UK postcode
the site will tell you about any environmental/pollution/flooding and subsidence
risks to the property.
www.upmystreet.com is a useful agent’s site to see what property is
on the market.
www.mortgageslaidbare.info The Financial
Services Authority no nonsense guide to mortgages site.
In summary expatriate borrowers are
treated as second class citizens who may as well be from Mars as Dubai or Hong
Kong. It’s a frustrating business dealing with UK financial institutions from
the UK – from overseas it’s a nightmare.
Most lenders flimsy defence to inability
to lend to expatriates or the need to impose unfavourable terms rests on their
unwillingness to pursue debt overseas. This totally ignores the fact that loans
are only offered to a lower percentage than in the UK, and in the unlikely event
of repossession the lender would probably take over an income producing asset.
IMP have demonstrated for many years that the persistency of expatriate loan
books is superior to domestic books.
The main banking groups, Barclays, HSBC,
Lloyds, RBS and Santander, now account for over two thirds of lending in the UK.
An unhealthy situation. Unsurprisingly this grouping also accounts for more than
90% of customer complaints! More competition amongst lenders is required which
in turn could open up the expatriate market.
A further factor is that lenders’
underwriting procedures are now so geared to box ticking that dealing with
expatriates with more complicated lifestyles than UK residents is just beyond
the competence of most UK lenders. Looking back at the lending conditions
prevalent twenty years ago there has been absolutely zero progress in this field
of lending operations – pathetic really, and what an opportunity for a lender
with foresight seeking to build a risk free, high quality loan book.
ADRIAN WRIGHT
International Mortgage Plans
January 2012
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