Following the uncertainty surrounding Brexit relations, banks and building societies in the UK have become unwilling to lend to British expats living in Europe, even as expats living outside the EU do not face the same barriers when buying in the UK.
“With no comprehensive financial statement being part of the UK Brexit deal, many of the biggest British building societies have decided to stop lending to EU residents until the position is clarified,” Guy Stephenson of mortgage broker Offshoreonline explained in an interview with The Telegraph.
The trade deal announced between the UK and the EU in 2020 following Brexit did not include terms on financial services. As a result, many high street banks and building societies have stopped serving the British market, leaving expats, looking to purchase a buy-to-let in the UK or buying to keep a foot in the British market, feeling left out.
“This is partly to do with the increased difficulties in checking income, expenditure and general affordability, as well as the lack of a finance bill, which has still to be agreed,” another broker said.
The majority of the lenders offering buy-to-let mortgages to expats were smaller building societies. This contributed to the exodus from the market post-Brexit.
“The EU was always considered a safe bet for lending, but with so much uncertainty surrounding banking relations, the smaller, niche lenders who dominated the expat market have pulled back,” Chris Sykes, of broker Private Finance, said in an interview with The Telegraph.
This means that UK nationals living in the EU hoping to buy a property back home have had to resort to seeking out foreign lenders. One borrower – a UK national living as a teacher in Germany – was turned down by a British building society despite meeting its deposit and rental income criteria.
“We got him lending with an international bank based outside mainland UK,” Stephenson said.
Expat buyers investing in property in the UK will need to pay a premium, too. Whereas normal buy-to-let mortgages for buyers living in Britain start from 1.8%, expat buy-to-let deals will more typically be in the 3% range.
Despite the challenges of finding a lender and two successive interest rate rises by the Bank of England in just six weeks, Stephenson observed that British buyers living abroad have been undeterred. The number of expat buy-to-let inquiries have continued at the high levels observed late last year, he told The Telegraph.