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Whilst there are over 200 mortgage lenders in the UK, only two dozen or so extend terms to expatriates. The market has always been dominated by international banks offering decidedly lacklustre terms to their captive market. Usually loans are conditional on a banking relationship and the borrowers willingness to submit to mediocre terms and equally mediocre conditional in house insurance deals.
From time to time mutual building societies have flirted with the market, and for ten years or so the Portman Building Society provided best buy terms through exclusive broker arrangements. Regrettably they are now history following their merger with the Nationwide to whom expatriate lending is anathema.
So who are the main players in this market place and what are their strengths and weaknesses? Below is an A-Z to expatriate mortgages, which whilst not exhaustive gives a good overview of the market.
Interior: Lloyds in London
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 now of little help to expat borrowers and are particularly obstructive to existing borrowers looking to extend their terms, or borrowing levels.
B. Bank of Scotland – Halifax
Part of the huge HBOS group (H for Halifax) grouping Bank of Scotland International do at least try to help on better than average terms. Loan to values of 60/70 percent are available and margins over Base competitive. However currently they insist on 6 months interest being lodged via a deposit account yielding just a quarter percent! Hardly encouraging!
C. Cheltenham & Gloucester
A former building society who since their acquisition by Lloyds-TSB don’t seem to know if they want to lend to expats or not. When they do their terms are very attractive -- unfortunately their service standards are abysmal. If you are in a hurry, dealing with this lender will have you and your broker in a straitjacket!
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 in London, plenty of expatriates have lost their savings at the hands of the carpetbagging developers and agents sales forces. Imagine northern cities awash with empty unsaleable, unmortgageable investment apartments. Caveat Emptor (Latin for 'let the buyer beware') is the order of the day and if attending, make sure you leave your wallet, credit card and ideas of a “quick buck” at home.
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. There is a limiting minimum loan of £150,000. The latest banking crisis has seen them pull back and impose less attractive terms and unreasonable loan conditions.
H. Heritable Bank
Unfortunately Heritageble Bank is another victim of the Icelandic bank failures -- as part of Landsbanki. This is a shame - rather like Fortis they were a true 'niche lender', with a 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. There are rumours that Heritable may resurface. Meantime they are very fair to those borrowers still ‘on their books’.
Considering their high profile as “the worlds local bank” HSBC seem remarkably feeble in helping customers with UK financing or refinancing. Whilst rates are competitive and the bank seems is intent on selling every other service they have to offer, mortgages meanwhile appear to have taken a back seat. All sorts of restrictions impede the intending borrower and there are increasing reports of initial agreements being subsequently reneged on.
The mighty Halifax, once accounted for 30 percent 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.
Now part of HBOS they have spells when they are very helpful to expatriate customers, and other times when they are of no assistance whatsoever! Right now they are going through one of their helpful phases, but they still insist on odd criteria such as requiring -- a declaration that the expatriate borrower will have returned to the UK within three years from making their application! They can be particularly helpful to existing borrowers needing to move or achieve further borrowing, and that position differs them from most of their competitors.
I. Ipswich Building Society
Now in their third year of expatriate lending via an exclusive deal with the mortgage advisers International Mortgage Plans. Currently their terms are limited to expats not letting, but this still embraces many situations – parents, wife/children occupying whilst husband works overseas or children studying at a British university and siblings needing assistance. Letting situations have been accommodated on ultra competitive terms, but the FSA (Financial Services Authority) are currently restricting those levels of lending. 2010 should see a resumption. Rates, terms and service have all been ‘best buys’.
Very involved in the expatriate world via its overseas club and representation in most expatriate centres, particularly Dubai, Hong Kong and Singapore. In its previous guise, as 'Hill Samuel', Lloyds in Hong Kong truly had the Asian market 'by the throat'. There have been some indications of a campaign to reachieve their previous competitive position that they held prior to their fall from grace during the recent banking crisis. Average lending terms are countered by flexibility, currency options and the ability to offer terms in countries rather than just the UK.
M. Mortgage Brokers
Brokers should be able to access the entire, albeit limited, marketplace. They will certainly be renumerated by the lender via a procuration fee and this could determine the arrangement fees they will usually charge. This could be anywhere between 250 GBP and 1 percent of the loan but a good broker should be able to save an applicant serious money. By handling the processing of the loan proposal mortgage brokers can help avoid much of the headache experienced when in dealing with lenders who curiously seem intent on employing sales prevention forces.
N. Nationwide Building Society
Nationwide are the UK’s largest building society. Six times the size of their nearest competitor and that can’t be healthy! They behave like the worst of the banks and are absolutely no help at all with expatriates wanting to raise money for property finance. They are of course extremely happy to accept expatriate's 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 approve any further borrowing for them and will not assist with changes of property if the new property is to be let. Their service standards are abysmal.
P. Portman Building Society
Portman were probably the most competitive provider of expatriate mortgage funds via an exclusive broker arrangement for over 10 years. 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 percent to 2.5 percent 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.
Unfortunately expatriates wishing to purchase or refinance property in Scotland have a particularly difficult time. This is odd when we consider the huge numbers of Scots who inhabit most expatriate centres around the world. 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.
Stroud & Swindon Building Society
Britain’s thirteenth largest building society spent two years building up a 20 million GBP. expatriate book via an exclusive broker arrangement. Their rates were best buys with a 2.3 percent - 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 GBP book walk away as the exclusive deal had no early repayment penalties.
T. The Mortgage Works
Previously a subsidiary of Portman B S, now Nationwide. Their propositions were aimed at buy-to-let lending, including loans for expats. Whilst their rates were not that competitive, 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.
The expatriate homeowner buyer and borrower are newly empowered! They no longer have to rely on the sales pitch of agents far away or developers 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.
In summary, expatriate borrowers are treated as second class citizens who may as well be from Mars rather than Dubai or Hong Kong. It’s a frustrating business dealing with financial institutions from the UK – from overseas it’s a nightmare.
Most lenders' 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 small percentage of the population in the UK, and in the unlikely event of repossession the lender would probably take over an income producing asset. The company 'International Mortgage Plans' have demonstrated for many years that the persistency of expatriate loan books is superior to domestic books.
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 to expatriates – pathetic really, and what an opportunities there are for lenders with foresight seeking to build a risk free, high quality loan book.
Adrian Wright / Expatica
Adrian Wright of International Mortgage Plans offers Expatica readers expert advice through our 'Ask the Expert' channel. He provides specialist mortgage services to expatriates: firstname.lastname@example.org.
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Photo credits: tophee, phogel (flickr)
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