The government has confirmed that expats who buy residential property in England and Northern Ireland will be hit with a new 2% stamp duty surcharge from April 1, 2021.

Chancellor Rishi Sunak confirmed the measure in his first Budget speech in the role, following much speculation about the policy over recent weeks.

Budget documents released today by the government say: “This will help to control house price inflation and to support UK residents to get onto and move up the housing ladder. 

“The money raised from the surcharge will be used to help address rough sleeping.”

Calculations published alongside the policy suggest that officials expect the measure to raise £250m to the Treasury’s coffers during 2020/21, but that the government will lose £355m in revenues the following year, possibly as a result of lower transaction numbers.

But in 2022/23 the government expects to raise £35m followed by £105m and £105m each for 2023/24 and 2024/25.

There was a mixed reaction to the policy from industry commentators.

Just Mortgages national operations director John Phillips says: “A surcharge for foreign buyers of residential property is something I have argued in favour of for a long time, so it would be churlish for me to criticise it. 

“But what is needed alongside that is a reduction in stamp duty elsewhere.

“As the Institute for Fiscal Studies has said, stamp duty is a tax on transactions, pure and simple, which freezes up the market and means people don’t get to live in homes that meet their needs.

“This Budget is being delivered in unexpected and extraordinary circumstances so it is understandable that the chancellor may not see this as a priority. 

“I hope that he will revisit the issue once Covid-19 is under control, in line with the promises previously made by the Prime Minister.”

Knight Frank head of London residential research Tom Bill says: “The introduction of a surcharge for overseas buyers will bring the UK into line with many other global property markets. 

“Attempts to ease affordability pressures in the wider housing market should be welcomed, although the new measure will need to be monitored carefully to ensure there are no unintended consequences, including for the forward-funding of new-build developments. 

“Furthermore, a wider re-think of stamp duty rates is still needed to increase housing market liquidity and maximise any stimulus the government plans to provide to the UK economy.”

If you are expat considering property as an investment in the UK but you live outside of the Country it’s likely you have many concerns, exchange rate fluctuations and Brexit are likely to have a significant impact on your decision.

Future rates of exchange are likely to depend on the kind of exit deal that is negotiated, combined with the currency that you will be using to purchase a property.

Expat mortgages

Stepping away from currency and exchange rate fluctuations, it is widely predicted that interest rates may rise at some point. That said, nobody really knows exactly what conditions would have to be met as a result of exiting the EU that would have a direct impact.

We know from experience, immediately after the vote to leave the EU, interest rates were reduced by 0.25%, but whether this would happen again in the event of no-deal, it is unclear.

What is always prudent in such periods of uncertainty is to review your current mortgage rates and consider switching to a fixed rate for a period that is suitable for you.

Use a mortgage calculator to establish what would happen if rates rose/fell and then speak to an independent mortgage consultant to discuss whether it is worth re-mortgaging.

If you are already using a fixed rate mortgage, be aware that most UK banks will let you re-evaluate your fixed term without penalty if you are within three months of the fixed term coming to an end.

Can we assist you?

If you are looking for a new or re-mortgage do get in contact and one of our qualified independent advisers will be happy to help.

Expat first-time buyer activity reached a 2 year high at the end of November last year after soaring more than 40% on the same period in 2018. In October last year alone the expat mortgage industry saw an increase in applications for new mortgages rise by 38%. These figures go to prove that expat’s still see property in the UK as their number one investment, and it is little wonder when you see the growth the market has shown over the last 10 years.

The UK housing market keeps going from strength to strength even with the Brexit setbacks which now seem to be coming to a head. This growth is likely to continue due to the chronic shortage of quality homes for sale. If this continues to be the case in the future property prices will remain high and increase accordingly.

Estate agents around the country are reporting a high demand for low end quality properties with first-time expat buyers being very active. One agent in Sussex said, “We are getting a lot of enquiries from people living abroad (Expats) and they want a property at the low end of the market in good condition”.

The UK property market continues on an upward spiral and offers longer term growth and security. Mortgage lenders are still reducing interest rates to attract new business, so if you are contemplating investing now would seem a good time to buy in the UK.

There is little doubt the attractive mortgage interest rates currently on offer have played a key role in driving these figures. Expat borrowers have taken advantage of the current low rates and used a re-mortgage in particular to their benefit.

Can we assist you?

If you are looking for help with your new or re-mortgage please contact one of our fully qualified independent advisers and they will be happy to guide you.

The amount of money being lent by banks to expats reached its highest level in the month of November since 2008, data shows. With the buy-to-let market stumbling to get back in gear after recent stamp duty hikes, first-time expat buyers and re-mortgages are now propping up the market. Last month, gross mortgage lending to expats reached record levels and the trend seems to be continuing.

Brexit and the election have without doubt had an effect on the market but enquiries since the election have increased even more.

Overall mortgage lending to expats continues to hold up very well, but we seem to have a twin-track market. A recent weakness in buy-to-let and has been offset by an increase in first-time buyers and re-mortgage lending. But now it seems the buy-to-let market is making a new surge since October 2019.

A continuing acute shortage of homes being offered for sale is one aspect of a broken housing market that looks unlikely to be resolved anytime soon.

Outlook for 2020

The annual growth in mortgage lending was most likely driven by an increase in the number of expats re-mortgaging to better rates, offsetting the impact of a fall in property transactions.

Affordability constraints, caused by increasing house prices, the cost of stamp duty and rising inflation, are still hindering the market by limiting the number of people who can afford a property. This is likely to continue throughout 2020.

Experts within the expat lending community expect the market to remain strong and active especially if Brexit finally reaches a conclusion.

Help required?

If you are looking for a new or re-mortgage, please do make contact and one of our independent advisers will be pleased to help.

The Ipswich Building Society has revised its expat residential mortgage lending criteria to now allow applications from British nationals living overseas whose deposit has been saved in their current country of residence.

Up to now, the entirety of the applicants’ deposit for the purchase had to be held in a UK-based bank account for a minimum of six months.

Foreign currency deposits will be accepted on purchase and re-mortgage products for both residential and buy to let products for properties located throughout England and Wales. Applicants can apply directly or via intermediaries who are either based in the Society’s ‘heartland’ area or members of selected networks and clubs.

The change is aimed at supporting more British nationals who live overseas and follows the product refresh earlier this year which extended the terms for residential applications to include those who are paid in one of ten selected foreign currencies.

The deposit must be held in an account in the name of either of the applicants (or a joint account in their names) and the applicant must provide evidence (in English) of the build-up or source of the deposit i.e. by providing savings/bank statements, evidence of a previous property sale etc.

Applicants for residential mortgages must be paid in one of the following currencies: GBP, Euro, Swiss Franc, Norwegian Krone, US Dollar, Canadian Dollar, Singapore Dollar, Hong Kong Dollar, UAE Dirham, Kuwaiti Dinar, Qatari Riyal and applicants must be employed by a recognised international employer (i.e. a large multinational firm).

Buy-to-let applicants can be paid in any currency as the rental income is used to assess affordability. Deposits must be from the applicant’s own resources (no gifted deposits accepted) and the funds must be transferred to a UK-based bank account in the name of either of the applicants (or joint account in both their names) prior to application.

Fixed and discount options are available on a two-year basis plus a five-year fixed rate is available. Residential products are available up to 80% loan to value (LTV) and buy-to-let at 75% LTV. Loans are available from £75,000 to £500,000 with a maximum term of 40 years. There is no maximum age limit and new build homes will be considered.

Residential applicants must have a minimum income of £40,000 GBP or equivalent, and employed, self-employed, pension and investment income will be considered when assessing affordability.

Can we help?

If you are looking for a new or re-mortgage please do make contact and one of our qualified independent advisers will be happy to assist.