A to Z of Expatriate Mortgages
A to Z of Expatriate MortgagesWhen International Mortgage Plans (IMP) established their advisory service
in Hong Kong twenty nine 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 borrower’s
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. Recently several UK building societies have
decided that lending to expatriates might be a good idea provided they can make
extra profit from them. Hence the ‘new boys on the block’, the Bath, Kent
Reliance, National Counties, now known as Family Building Society and Saffron
Building Societies have dipped their toes in the water with pretty mediocre
terms expecting to charge expatriates arrangement fees of 2-2½%. They are
pricing for greed, and little wonder that so far, their products have been
largely ignored by expatriates familiar with the more reliable established
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.
……. and Australia!!
Not a lender, but there are problems with obtaining facilities for British
expatriates resident in Australia. This is as a result of the Australian
Corporate Governance Act which initiated particularly vicious banking regulatory
restrictions which have put a stop to our mainstream lenders, Lloyds (now
withdrawn from expatriate lending), Nat West/RBS, Bank of Scotland etc.
advancing funds to British expatriates living in Australia for UK property
financing. Attempts to find an explanation for this Australian protectionism
have failed. Fortunately, the directive does not extend to all building
societies, and hence our limited facilities for building society lending are not
B. B M Solutions
Part of Lloyds Group and expatriate terms withdrawn 9/11/12.
Buy to Let
Expatriates have purchased investment property to keep a foothold in the Uk
and as part of pension planning. New rules now in force mean enquirers and
clients should seek professional advice on their UK tax
In June 2016 the British people voted to leave the European Union.
The subsequent reduction in sterling against the US dollar has made
purchasing property in the UK cheaper for many expats. However, this has been
offset to some extent by the impending tax changes and the uncertainty as to
what terms will be applied to the UK on leaving Europe.
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
………Dudley Building Society
Will consider expatriates up to 60% loan to value. Must own property in the
E. Exhibitions – Property
Currently the London property market is being inflated with the influx of
investment purchasers from the Far East, Gulf and Russia. In 2013 72% of all
London new property sales went to overseas property investors, many of whom will
be hoping to ‘flip’ their contracts before completion date. This was the problem
with the Docklands ‘developments’ in the late ‘80’s. History may well repeat
There are reports that Britain’s biggest housing development, Nine Elms in
London, is seeing a rave of ‘flat flipping’ as investors try to sell unbuilt
properties amid fears the Capital faces a glut of expensive homes. Nearly 20,000
units are under construction at Nine Elms on the South Bank of the Thames facing
Chelsea. You have been warned! For those that want an up to date view on what is
happening in the London property market we can thoroughly recommend the website
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.
G. Gazumping Has made an unwelcome return to the property market. Unscrupulous
estate agents and greedy vendors have been taking advantage of strong demand and
reneging on agreed sales
Also part of the Lloyds Grouping. There seems to be some sort of
movement towards helping expatriates where the loans are residential, but this
is on a very discretionary basis. Complaints from applicants and personal
experience indicate that the Halifax are now exhibiting all the worst aspects of
their Lloyds parentage. Applicants applying for a £500K mortgage on £1m. plus
properties are being asked to give details of their expenditure on Sky,
groceries etc. – crass stupidity! May consider expatriates for residential
mortgages where all salary is paid in sterling. A rare occurrence.
……. 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.
Existing borrowers are often offered ‘discounts’ to move their accounts. This is
an area IMP can advise on.
……. Holiday Lets
Whilst the purchase of a property for holiday lets has many
positive aspects, unfortunately that view is not shared by our myopic lenders.
We have access to one lender who will consider these. Maximum loan to value is
70% and 65% for flats and apartments outside the London area.
…….. Holmesdale Building Society
Another newcomer to expat lending via a limited panel of
introducers which includes IMP. They offer terms for expat buy to let and expat
residential, and are competitive in both areas of lending. Currently withdrawn
from the sector but may return at a later date.
…….. Homes of Multiple Occupation (HMOs)
These too are shunned by expatriate lenders and indeed by 95% of
UK lender where UK residents are concerned. IMP has access to a lender with a
maximum loan to value of 50%. Applicants must currently own property in the UK.
Ex local authority flats and flats over commercial premises also considered
Considering their high profile as “the world’s 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 and lending policy changes with the phases of the moon.
I. Ipswich Building Society
An old established UK building society and the only one making
loans of any significance to British expatriates overseas. Now in their tenth
year of expatriate lending via an exclusive IMP deal. Rates, terms and service
are consistently ‘best buys’. This probably reflects Ipswich’s mutuality
existing as they do for the benefit of their members. At the present time,
Ipswich have temporarily withdrawn from residential lending due to the Mortgage
Credit Directive on currency earnings. Currently offering buy to let lending to
expatriates on purchases and remortgages to 75% loan to value. Funds are limited
to monthly allocations. It is hoped that Ipswich will return to the residential
expatriate sector when the impact of the new directive has been assimilated and
new monitoring systems put in place.
J. Joint Mortgage
The majority of our lending partners will accept an application
for a mortgage in joint names although one partner may not be earning.
K. Kent Reliance Building Society
This Society is now owned by J C Flowers the international
conglomerate, and it is unlikely that we will see much mutual building society
paternalism from this lender. Applicants must already own a UK property and
facilities will be restricted to London and the South East. An eye watering 2%
arrangement fee will be required, and apart from the ability to lend on new
builds which are shunned by some other lenders, we don’t see a great deal of
future in using this lender’s terms.
….Know your customer.
Applicants, lenders and mortgage brokers are burdened under the
weight of money laundering regulations. Fully completed forms, the correct
certified (where required) supporting documents make for less stressful and
Lloyds once had the expatriate mortgage market by the throat and
were by far the largest supplier of funds. They were particularly strong in the
Far East where their Hong Kong and Singapore offices were very aggressive in
In withdrawing from expatriate lending, they have created a very large gap in
the amount of funding available. Hence other lenders are under more pressure
than they feel comfortable with. It now seems obvious that Lloyds were far too
generous in their terms and this has been reflected in the impact made on the
profitability of their ‘lending book’.
M. Mortgage Brokers
They should be able to access the entire, albeit limited,
expatriate marketplace. They will almost 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 £500 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.
……. Mortgage Credit Directive.
New regulations effective March 2016 require lenders to install
expensive monitoring systems for residential mortgages, where borrowers are paid
in a foreign currency. Many lenders have decided to withdraw from this area of
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 deposits. 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 (as 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 original
Portman borrowers they acquired. This has been successfully contested and their
……….. Nat West Offshore – aka 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 been curtailed,
thankfully their Guernsey office provides an excellent service. In shades of
‘dropping the dead donkey’, RBS have now rebranded as Nat West Offshore
Loans are available on a capital repayment basis to 75% of valuation for
properties valued at less than £1 million. Loans of 70% are available interest
only at a rate .5% lower than larger loans. This lender is particularly generous
when it comes to follow-on products for borrowers coming out of their initial
deals. Currently they offer a 4% standard variable rate with no early redemption
NatWest International Isle of Man will consider residential lending to
expatriates but are restricted depending on the applicants’ country of
Lenders who consider expatriates may be located on the UK mainland, the Channel
Islands or Isle of Man. Each office will take a different approach to
P. Portman Building Society
Portman were probably the most competitive provider of
expatriate mortgage funds via exclusive IMP arrangements 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’.
Q. Qualified Accounts
Not many expatriate lenders accept the self employed. Those that
do invariably require accounts to be prepared by a UK qualified accountant. IMP
can provide a list on request.
R. Regional Building Societies.
With limited resources to compete with the large lenders they
seek niche markets to operate in. Thankfully the expatriate sector is one of
New rules implemented by the regulators have had an impact on
borrowing capacity for buy to let mortgages. A general rule is that for every
£1000.00 borrowed, rental has to be assessed at £6.64 per month.
A couple of the regional building societies will accept applications from
repatriates without long periods of qualifying residency in the UK
Unfortunately, expatriates wishing to purchase or refinance
property in Scotland have a particularly 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!
....... Saffron Building Society
Saffron were active in the expatriate market place via IMP pre
the 2008 crisis. Whilst their return to the market place is most welcome, they
too seem to see expatriate lending as a way of boosting profits via an
arrangement fee of 2.5%. They say they have no early redemption charges –
perhaps they don’t, they just take it up front! An unattractive standard
variable rate of 5.39% will not see expats rushing to access their terms.
……. Skipton International
Skipton International are a welcome addition to the increasingly
meagre supply of expatriate mortgage funding. They are very competitive on
interest rate, and unusually offer a variety of fixed rate deals. However, they
prescribe the residents of no less than 97 countries, require a declaration that
the borrower will never live in the subject property and their stress testing
for affordability is fierce. Loans are subject to the law of Guernsey. A
notional 6% interest rate used in the buy to let calculator can make the desired
level of lending difficult to achieve.
……. 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 are now watching 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 have shown little help in assisting the expatriate
borrowers they have taken on board. Disappointing!
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.
The previous Chancellor George Osborne in successive budgets has
implemented changes in the tax treatment of buy to let investors which will be
phased in gradually until 2020. Buy to let investors are advised to seek expert
advice in this sector so that they are not landed with unexpected tax bills. W T
Fry have always looked after expatriates
Key to the application process. Fully completed and packaged
applications are the best way of seeking a quick and efficient mortgage offer
V. Variable Rate
Expatriates lead busy nomadic life styles. They should always
ensure that when the initial product matures they are not disadvantaged by being
placed on a standard variable rate.
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.
mortgages there is no need to look further than Google, using the key words,
expat mortgages, expatriate mortgages and expat buy to let.
new and very comprehensive property price comparison site.
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
a UK postcode the site will tell you about any environmental/pollution/flooding
and subsidence risks to the property.
a useful agent’s site to see what property is on the market.
Financial Conduct Authority no nonsense guide to mortgages site.
X. X-Rated Lending Policy
The proliferation of confusing, bewildering and conflicting policy that
different lenders apply when accepting expatriate business. For example, one
lender will accept residents of Australia but not an application where parents
will occupy. The next lender will lend where parents occupy but not lend to
residents of Australia. Policies have often been in force for many years and the
lenders show a great unwillingness to adapt and meet changing needs.
The return on investment... Important when expatriates are searching for
investment property. Factors to take into account the, possible rental voids,
taxation and general upkeep and maintenance.
A tool used by many offshore lenders when considering applications for property
in the London area. Many use the Transport for London zone areas in deciding
where to lend. For example, restricting lending to zones 1-4 and not all 9.
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 has demonstrated for many
years that the persistency of expatriate loan books is superior to that of
The main banking groups, Barclays, HSBC, Lloyds (now withdrawn from expatriate
lending) Nat West/RBS and Santander, 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.
International Mortgage Plans
Tel: 01932 830660
Fax: 01932 829603 July 2017