Expat Brits more often than not seeking to purchase property in their home country find themselves often frustrated in sourcing the right lender along with mortgage products from a shrinking pool of lenders. Unfortunate consequence of the credit crunch in 2007 has resulted in an ever limited mortgage market, and recent regulatory changes has had a further blow to dampen the expat residential lending market.

 

A primary regulatory change affecting British expats has been the advent of the 'Mortgage Credit Directive' (MCD) which came into force on 21st March 2016. The MCD is a European legislation designed to foster a single market for mortgages and to protect consumers.

 

Definition of 'foreign-currency loans':

 

The MCD defines a foreign-currency loan as a credit agreement where the credit is: 1) denominated in a currency other than that in which the consumer receives the income or holds the assets from which the credit is to be repaid; 2) denominated in a currency other than that of the member state in which the consumer is resident.

 

Here the main impact has been if you are not paid in sterling, your mortgage will be defined as a 'foreign currency mortgage/ loan'. Below is some regulatory compliance impacting expat residential mortgages which certain lenders need to meet:

 

Where an MCD regulated mortgage contract relates to a foreign currency loan (mortgage or remortgage) the MCD mortgage lender must ensure in order to manage exchange rate risk:

 

•  the consumer has a right to convert the MCD regulated mortgage contract into an alternative currency under specified conditions; or

 

•  there are other arrangements in place to limit the exchange rate risk to which the consumer is exposed under the MCD regulated mortgage contract (MCOB 2A.3.1R).

To simplify relevant lenders are now exposed to foreign currency fluctuations if you take out a residential 'foreign currency mortgage' you may be entitled to move your loan to a different currency to mitigate risk if movement is beyond certain percentage or set parameters. Or the respective lender may decide to absorb any currency movements and share the risk of any currency fluctuation. In practice each lender will have its own lending criteria that takes into account regulations concerning 'foreign currency loans'.

 

The new rules also require firms to regularly update customers who have a foreign-currency loan when exchange-rates vary by 20% or more from the rate that applied at the time the mortgage contract (MCOB 7A.4.1R) was concluded.

Lenders within this sector target their UK mortgages at more than just British expats but also to the international market, fuelling demand in particular for London property by 'foreign nationals' and non-UK domiciled nationals.

 

MCD rules are not applicable in the case of limited companies or offshore structures when purchasing a residential owner occupier property. We have lenders who have a particular appetite to lend in such circumstances and often geared towards high-net-worth clients requiring more sophisticated finance solutions.

 

Foreign currency mortgages are not suited for everyone but can be the right option for those that know the risks involved, meeting their individual requirements.

Are you purchasing or refinancing a property using an offshore trust structure or by means of a limited company? There can be many reasons as individuals, for example it can be a more tax efficient vehicle, asset protection, or there may be other underlying complex reasons based on professional advice you may have received.

 

With certain lenders we harbour close working relationships, after understanding your personal circumstances we can negotiate terms and the best way forward in structuring a loan.

 

Often the better the quality of initial information we receive from you, the better the outcome i.e. trust structure, jurisdiction, company formation etc. You can openly and discreetly discuss your circumstances to find a viable mortgage solution that works for you.

 

In the case of 'high-net-worth' individuals non-domiciled in the UK we can cater for loan options where you may not need to repatriate funds into the UK as part of the deposit.

 

Here you will receive a hands on approach and be afforded attentive professional service, where the application even if complex and challenging can be managed with utmost care to source the right lender and terms.

 

When you approach us, please be mindful we seek to add value in negotiating with lenders on your behalf in a firm and professional manner, not only discussing rates but seeking a holistic structured loan. We have been dealing with certain lenders spanning many years and can have meaningful dialogue based on trust and professionalism.