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Expats interest rates are down

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The average interest rate for two-year and five-year fixed rate mortgages has dropped to the lowest level since records began in 2007.

Why are mortgage interest rates dropping?

The Bank of England has made two emergency cuts to the base rate (the bank’s set interest rate for lending to other banks) in response to the coronavirus pandemic.

These have reduced the base rate to a record low of 0.1%.

This fall in the official cost of borrowing has impacted swap rates (when two different parties swap interest rates), upon which fixed-rate mortgage deals are based.

Lenders have passed on the reduction in their own costs to borrowers.

Despite being able to make mortgage deals cheaper, banks and building societies have had to review the level of risk they take in lending.

This is due to the impact the virus is having on the UK’s economy.

As a result, many lenders have reduced the number of products they offer those borrowing a high proportion of their property’s value. In other words, those who need a mortgage with a high loan-to-value (LTV).

Is it a good time to re-mortgage?

The record-breaking fall in average fixed-rate deals makes it a great time to re-mortgage Especially if your current mortgage deal is coming to an end.

This is the same for those sitting on their lender’s standard variable rate (SVR).

The typical interest rate charged on an SVR is around 4.5%.

This means that expat homeowners could save more than £2000 a year if they switch to an average two-year fixed rate deal, based on a £200,000 mortgage.

Need assistance?

Our professional independent advisers are used to dealing with all types mortgages, they have vast experience in the expat mortgage market.

 

 

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Coronavirus – Expats are asking, can I still apply for a mortgage?

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Definitely yes! One big difference between the challenges of 2020 and the economic turbulence of 2008’s credit crunch is that there is no issue with the liquidity for banks and building societies.

Expats should review their UK mortgage and potentially save thousands

Make no bones about it, 2020 is the year of the expat re-mortgage. You only need look at the rates being offered by lenders – particularly in the lower LTV bands. These rates are not going to stay this low for much longer so if you have a expat current variable rate mortgage review it sooner rather than later.

Research suggests that over half of all expat borrowers who move to their lender’s standard variable rate after the current deal finishes don’t re-mortgage or product transfer for 10 years, while a quarter of re-mortgagors were said to find the whole re-mortgage process difficult, with 42% saying they didn’t have time to shop around.

The ‘shopping around’ mentality is clearly far more embedded in the UK consumer than ever before, however this doesn’t always translate to mortgage borrowers, even when the savings can be far more than changing utility company or broadband provider.

Expats need to get the message that re-mortgaging is where substantial savings can be made – especially with rates as they are now. Rates are unlikely to remain this low for much longer so acting now could save thousand in the future.

A re-mortgage is not always suitable for everybody as your existing deal may well have penalties attached to change within the discounted period. It is always recommended to seek independent professional help as to what is best advice to suit your needs.

Like to talk over your mortgage needs?

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

 

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The mortgage market for expats

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In March 2020 the Bank of England made two emergency cuts to the base rate, The cut from 0.25% to 0.1%, made in response to the coronavirus pandemic, means the base rate is at its lowest level in the Bank’s 325-year history.

In the immediate aftermath of this reduction, banks and building societies withdrew some of their mortgage products.

Among the most common deals to be pulled were tracker mortgages and loans for people borrowing a high percentage of their property’s value.

The good news is that lenders that had pulled products are beginning to launch new deals for both fixed rate and tracker mortgages.

It’s very positive that we are beginning to see providers return products to their ranges and launch new deals, including some in the higher loan-to-value sectors.

These changes may be an early indication that lenders have begun to adapt to the exceptional economic and operational changes of recent weeks in order to continue supporting their customers, and that hopefully more providers will be following suit in the days ahead.

How much choice is there if I am looking for a new mortgage deal?

While the number of deals available for expats has continued to fall since the beginning of April 2020, there are still a good range of mortgages to choose from.

Choice is widest for people with large equity stakes in their homes or big deposits to put down.

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.

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Expats should take heart

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Expats should take heart

The direct and indirect impact of COVID-19 has affected the performance of different sectors and financial markets in different ways. The world’s major indices have suffered considerable losses – recently, it was reported that The Dow Jones Industrial Average crashed by almost 32%.

Other financial assets have so far proven resilient, such as UK real estate

The ‘Boris bounce’

House prices are typically used as an indicator of capital growth for real estate. In 2019, the political deadlock over Brexit resulted in significant market uncertainty and modest house price growth. Some commentators feared house prices would drop significantly as a consequence of Brexit – however unlikely such events actually were.

Boris Johnson’s victory in the 2020 General Election and his subsequent ability to pass the EU Withdrawal Bill through parliament resulted in surging investor interest in residential real estate. House Price Indexes for March 2020 provided evidence to this affect.

Both Halifax and Nationwide recorded that average residential property prices that month were 3% higher than they were the year prior.

With Brexit uncertainty forgotten, sellers were again eager to place their properties on the market. Coupled with the government’s growing excitement about ushering their new ‘housebuilding revolution’, it seemed that the UK was finally ready to confront the ongoing housing crisis and match the growing demand for housing with the adequate level of supply; generating strong increases market activity and a return of strong value returns all-round.

COVID-19 has put a pause on transactions

Lockdown measures imposed by the government in a bid to contain the COVID-19 outbreak has had a significant impact on the real estate market.

For the moment, the government is actively discouraging people from buying and selling properties, and some lenders have reacted to this news by deciding not to take on new enquiries.

However, I believe the momentum around the post ‘Boris Bounce’-market has not disappeared. In fact, in lieu of transactions being available, pent-up demand is likely to further exacerbate market activity once the pandemic is over.

Ultimately, it can be said that COVID-19 has, in a sense, taken the place of Brexit uncertainty in artificially supressing market activity and, thus, property price growth.

This means that once the virus is contained there is no reason to suggest why the property market will not make a quick recovery.

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Expats should not hold back

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There is no doubt the developments in the expat mortgage market in response to the coronavirus crisis are moving at a frenetic pace. Helping clients is crucial for everyone in the industry currently, keeping on top of all of these updates to help navigate the best options for individuals is very important at this time.

Although you may have seen some press articles on the number of mortgage products decreasing from the market, re-mortgage products are still freely available.

As such, this period represents a great opportunity for expat UK homeowners to save money on their mortgage with some of the great low rates currently available.

If your current mortgage rate is coming to an end, despite this Covid-19 scenario the lender would still hike your rate up to their standard variable if you do not look into your re-mortgage options. There are some great mortgage deals being offered by lenders currently.

You may have seen some press reporting that surveyors are not considered ‘key workers’ and hence are not allowed to go out to visit and value properties (i.e. a “physical valuation”). Therefore naturally, you may be concerned about whether you can apply for a re-mortgage during this time. We have been in continual discussions with lenders and the good news is that more and more lenders are now able to do some valuations for re-mortgages without the need for a home visit, using market data and knowledge of the location to estimate the value. An intermediary can help guide you on what lenders offer these types of valuations.

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.

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Coronavirus – Expats are asking, can I still apply for a mortgage?

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Definitely yes! One big difference between the challenges of 2020 and the economic turbulence of 2008’s credit crunch is that there is no issue with the liquidity for banks and building societies.

They have the means and the willingness to lend. However, what we are seeing are disparities with how each lender responds to the current situation.

Some lenders have been impacted from a service perspective more than others due to staff shortages.

We are seeing these lenders have to withdraw some mortgage products, or to cap loan to values (the percentage of the property value they will lend as a mortgage against the property) to limit and manage the amount of business they attract, in order to give themselves breathing space.

For example, in recent days some major lenders have temporarily introduced a maximum loan to value of 60% whilst they manage service levels.

What about a valuation?

Physical valuations have been put on hold during this period of self-isolation. This means that valuations are currently deferred for an initial period of around four weeks.

However, this does not mean you should hold off applying for your mortgage. By submitting the application you are locking in the mortgage rate offered with most lenders, which with current fluctuations is worthwhile to secure a low rate on your mortgage.

You can also get the majority of the paperwork and processing done, so that just the valuation will be required.

Also, some lenders will look to do a valuation on a desktop, or automated basis using data and knowledge of the location.

Where these are applicable, and on re-mortgages these are quite common, applications are processing to mortgage offer as normal. A broker can help guide you on which lenders offer these types of valuations.

Need assistance?

Our professional independent advisers are used to dealing with all types mortgages, they have vast experience in the expat mortgage market.

 

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Experts are predicting interest rate increases

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There is a lot of evidence to suggest interest rates are going to be rising sooner rather than later. Facts are a sizable number of expats have already transferred to a fixed rate mortgage deal; we have seen a significant increase in re-mortgaging since the turn of the year.

Base rates may well be on hold at present and mortgage rates are at the lowest they have been for many years. One thing is for sure if the bank base rate rises then mortgage interest rates will very soon follow suit.

A recent survey of expats showed that if this happens over 45% are not prepared for the increase in expenditure. The survey also revealed the majority of people have taken for granted the current low interest rates and that they will remain for a good many years to come. This may well be a very dangerous attitude to adopt as things can change very quickly in the world of finance.

It is widely expected in financial circles that interest rates will start to increase in the not too distant future, keeping this in mind if you are an expat with a mortgage it would be very wise to review it as soon as possible.

The future

With all the above considered it could be a very good time to look more closely at your current mortgage deal. By acting now you could save a great deal of money now and in the future.

Every expat has unique needs and objectives but one thing we all have in common is saving money. If your current mortgage deal has no exit penalty or is coming to the end of its deal period, you may wish to look at a fixed rate deal. There are currently some very advantages rates on offer so now could be a very good time to act.

Can we help?

If you require assistance or would like to talk over your current mortgage, please do call one of our fully qualified advisers and we will be pleased to assist.

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Welcome news for Expats

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The BoE also confirmed another £200bn of bond buying under the Quantitative Easing programme.

It will also be extending the term funding scheme, which encourages banks to pass on the benefits of interest rate cuts to companies and households.

A statement from the BoE reads: “At its special meeting on 19 March, the MPC judged that a further package of measures was warranted to meet its statutory objectives.

“It therefore voted unanimously to increase the Bank of England’s holdings of UK government bonds and sterling non-financial investment-grade corporate bonds by £200bn to a total of £645bn, financed by the issuance of central bank reserves, and to reduce Bank Rate by 15 basis points to 0.1%.

“The Committee also voted unanimously that the Bank of England should enlarge the TFSME scheme, financed by the issuance of central bank reserves.” Read more

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Expats face a 2% Stamp duty hike – April 2021

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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.”

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Expats will remain confident after rates remain at 0.75%

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The Bank of England kept interest rates steady on Thursday 30/1/2020, saying signs that Britain’s economy had picked up since December’s election, and a more stable global economy, meant more stimulus was not needed now.

Financial markets had seen a 50% chance of a cut, but the Monetary Policy Committee split once again 7-2 in favour of keeping Bank Rate at 0.75%.

Bank of England governor Mark Carney speaks of ‘modest’ economic forecast after the bank surprised many investors by leaving interest rates unchanged at 0.75% in its latest monetary policy decision.

The central bank kept the door open for a move after Governor Mark Carney hands over to his successor, Andrew Bailey, in March.

“Policy may need to reinforce the expected recovery in UK GDP growth should the more positive signals from recent indicators of global and domestic activity not be sustained or should indicators of domestic prices remain relatively weak,” the BoE said in its quarterly Monetary Policy Report.

But if growth picked up as suggested by upbeat business surveys since Prime Minister Boris Johnson’s unexpectedly emphatic Dec. 12 election win, “some modest tightening” of policy might be needed further ahead, the BoE said.

The central bank no longer specified that such tightening would be “limited and gradual”, a long-standing piece of BoE guidance that dated back to a time when a more rapid pace of interest rate increases might have looked likely.

The central bank estimated Britain’s economy did not grow at all in the final three months of 2019, a time of political uncertainty when parliament forced a delay to Brexit and a snap election raised the prospect of a change in government.

This will have a knock-on effect on economic growth for 2020, which the BoE forecasts will be just 0.8% for the year as a whole, the slowest since the financial crisis.

Growth is seen recovering over the year, however, reaching an annual rate of 1.2% by the final quarter of 2020.

Contact Expat Mortgages.