Why are house prices rising
The Royal Institution of Chartered Surveyors (RICS) in their recent quarterly survey, have found that Home buyer activity is increasing fastest in parts of the UK where prices have been the most depressed and buyers are returning to the market in their biggest numbers for four years.
RICS say that rises took place in every region, not just London and the South East. The largest rise in activity coming in the West Midlands and the North East, with both regions seeing their highest levels of interest amongst buyers for 14 years and overall, prices rose faster in July than at any time since the housing market peak in November 2006.
Why is this happening?
Well firstly, the figures suggest there has been an accelerated take-up of the government’s Help to Buy Scheme, which began in April 2013. This scheme, allows buyers of new-build homes to put down a 5% deposit and take out a government loan for up to 20% of the value of the property.
New government figures suggest there were 2,500 registrations under Help to Buy in May, 4,000 in June and 6,000 in July; clear evidence of an acceleration in demand.
From January next year, the scheme will be extended to help buyers of existing homes, and the government will guarantee a proportion of the loan to give the banks greater confidence to lend.
But RICS said that the Funding for Lending (FLS) scheme – where banks can borrow money cheaply from the Bank of England, providing they lend it on to businesses or individuals – has had a particular effect on improving mortgage availability.
It said FLS had improved so-called loan-to-value ratios, or the amount that banks and building societies are prepared to lend on any property.
On average, loans are now 83.6% of the value of a property, compared with 81.6% a year ago.
Mortgage rates have also fallen, making repayments cheaper.
Last week’s announcement by the Bank that interest rates are likely to remain at their record low for several years to come, is also likely to improve the number of cheaper mortgages on offer to buy a flat or a house in the UK, and the chances are you will face competition from other potential buyers. This demand is not simply limited to people living in the UK.
There are about five million British expats living and working abroad, and lots of them are struggling to find a bank happy to give them a mortgage for a property in the UK.
Many expats want to buy a UK property to ensure they are not left behind if house prices rise. They also want somewhere to live when they return home.
British Ex-Pats are contributing to the housing price boom
Securing a mortgage while living overseas has always been tricky, especially if you do not know which bank to approach. However, the task was made even more difficult late last year when Lloyds Banking Group pulled its expatriate mortgage range.
Lloyds, the banking giant running Halifax, Cheltenham and Gloucester, and a number of other lenders, announced the changes after an internal review. The move has left a large hole in the expat mortgage market and buying a property if you live outside the UK is now even harder.
Filling the gap
With a lender the size of Lloyds pulling out of the market, other banks and building societies have had to raise their game in an effort to try to fill the gap in the market.
“Mortgage lenders certainly require more information to lend to borrowers living abroad and there are more hurdles to clear”
The problem is that many of them are not geared up to deal with borrowers in exotic parts of the world and this has led to some expats becoming even more desperate.
Since the start of the year, brokers have taken a huge number of enquiries from British people living and working in Spain, Singapore, Saudi Arabia, Kenya, South Africa, Australia and, in particular, Hong Kong.
The most popular destinations for UK expats living abroad include Australia, Spain and the USA. According to a report by NatWest International, there are UK expats living in 41 countries who number at least 10,000 in each. Approximately 112 countries have at least 1,000 expats from the UK.
Many of the mortgage enquiries have been from bankers working in large financial districts, but there are also a lot of engineers, English language teachers, business professionals and doctors looking for help.
Applications require various forms of evidence about income and employment
There are a number of lenders offering mortgages to these expats, but they often do not make it obvious on their websites or when speaking to their call centres.
More mortgage lenders are recognising that there is strong demand from people living abroad and they are starting to think about offering expat mortgages.
Despite the tight lending criteria from some lenders and information stating that they will not lend to expats, one large lender recently twisted their rules.
It agreed to lend to a professor working abroad as he was planning to return to the UK in three years – when his contract expired. The bank lent to him on the basis that the borrower was an expert in his field and returning home in the foreseeable future.
Mortgage lenders want to be able to verify income details and they also prefer lending to borrowers if they work for multinational companies. This means they will want to see accounts and payslips.
It is possible to get a mortgage if you are a self-employed, although the lender will typically want accounts to be produced by a large international accountant. I know of one large private bank that will accept accounts from smaller companies, although they will want them to have an online presence and be verifiable.
Providing a bank with something as simple as proof of address can be troublesome for anyone living outside of the country, but it needs to be provided as part of the application. Many people working abroad have their utility bills paid for by their company and do not have any credit cards or bank account linked to their address abroad.
The banks are quite inquisitorial when lending money nowadays
In this event, lenders may accept a “letter of induction”, where an HR contact can provide this proof. The letter can also be written and signed for by a doctor or solicitor to prove they know the applicant.
One thing to note is that the lender may want to call and verify the letter and speak to the person that wrote it. This can be an extremely frustrating process, with different countries having different working weeks, or people going on holiday.
If you apply for a mortgage in the UK, you are often not assigned an underwriter or contact to process your application. This makes speaking to a lender and applying for a new mortgage a tricky task, especially if you live over the other side of the world.
Mortgage lenders certainly require more information to lend to borrowers living abroad and there are more hurdles to clear. However, providing borrowers work for a good company, they have a clear credit record and a good deposit, arranging a mortgage is usually possible
Share
David Jones is the Senior Partner and Founder of Morgan Jones & Company. Born in Liverpool and an Accountancy graduate of the University of Wolverhampton, David spent twenty years working for the Customs & Excise in London then Shrewsbury before starting his own business. David's depth of knowledge of the UK tax system and his ability to communicate this learning has seen Morgan Jones & Company grow into Shropshire's most respected Accountancy Practice.