I was recently able to secure an expat foreign currency mortgage for two clients looking to return to the UK after almost a decade abroad. The implementation of recent EU legislation – the Mortgage Credit Directive – made the case an interesting one.
My clients in this instance were a husband and wife. They had been living in Canada for the past 9 years, both working for the same large multi-national company. Now, the wife was being transferred back to the UK where she would be permanently based, receiving income in sterling. The husband would continue to work abroad for the time being, and would be paid in dollars and euros.
They wanted to buy a residence in the UK which would, in time, be the family’s main home.
There were a couple of complications, however. Generally, with expat mortgages, lenders require a client to show at least one year and preferably three years of address history to allow them to carry out credit checks. I needed to find a lender prepared to be flexible on this point.
New legislation also posed a few difficulties. The Mortgage Credit Directive (MCD), in force from March 2016, has had a big impact on foreign currency mortgages. Under its terms lenders are required to monitor exchange rates and issue ‘sufficient’ warning to clients as to their level of exposure. If two currencies fluctuate by a certain percentage, lenders will need to offer the borrower the option of switching currency. Understandably, this has led to a flurry of lenders withdrawing their offerings from the market in view of this increased burden of admin and risk. Although some lenders are still operating in this space, options for foreign currency borrowers have become limited.
Because the foreign currency was being earned through a multi-national company in this case, I was confident I would be able to find a competitive solution for them.
I managed to secure a mortgage at 85% loan to value (LTV) for my clients, at the very competitive high street rate of 2.31%. They were very pleased with the solution, which gives them the flexibility to rent out the property until the move.