Expat Mortgage Experts
A to Z of Expatriate Mortgages
JULY 2011
When International Mortgage Plans (IMP) established their advisory service in Hong Kong twenty three years ago, the market was dominated by a handful of international banks offering decidedly lacklustre terms to a captive market. Loans were often conditional on a banking relationship and the borrowers willingness to submit to mediocre terms and equally mediocre conditional in house insurance deals.
IMP broke that mould by introducing expatriates to mutual building societies and persuading the reluctant mutuals that expats offered high quality lending without risk. Whilst Town & Country, St Pancras and Britannia’s flirtation with the market were short lived Portman Building Society in taking over the St Pancras were to offer market leading products exclusively via IMP for over 10 years. Regrettably they too are history following their Nationwide merger to whom expat lending is anathema.
So who are the main players in this market place and what of their strengths and weaknesses. Here is an A-Z which whilst not exhaustive gives a good overview of the market.
A. Abbey – aka Santander
Still unkindly but deservedly referred to as “The Shabby”. Now under the parentage of Spanish bank Santander. Once Abbey were bold enough to open offices aimed at expats in Hong Kong and Dubai but these were closed during one of their frequent reorganisations. They are of little help to expat borrowers and are particularly obstructive to existing borrowers looking to extend their terms, or borrowing levels.
B. B M Solutions
A specialist buy to let lender now part of the Lloyds Group. Will only accept applications from employees of international companies. Competitive rates but offset by large arrangement fees of up to 3%.
C. Cheltenham & Gloucester
A former building society who since their acquisition by Lloyds/TSB don’t seem to know if they want to lend to expats or not. When they do, their terms are very attractive – unfortunately their service standards are abysmal. If you are in a hurry, dealing with this lender will have you and your broker in a straitjacket! If you left the UK more than three years ago they are unlikely to want to help. This lender now seems to have been side lined by the appalling Lloyds/TSB Group. They are no longer able to accept applications from intermediaries.
D. Derbyshire Building Society
Made a brief foray into expat lending and deposit taking. Involvement with the Icelandic banks enforced a run for cover under Nationwide’s ample umbrella.
E. Exhibitions – Property
As in the early nineties docklands shakeout, plenty of expats have lost their savings at the hands of the carpetbagging developers and agents sales forces. Northern cities are awash with empty unsaleable, unmortgageable investment apartments. Caveat Emptor is the order of the day and if attending leave your wallet, credit card and ideas of a “quick buck” at home.
F. Fortis
Their offices, in London and Hong Kong, offered a second-to-none service to expatriates and foreign nationals for many years. Their rates were slightly better than many of their bank competitors and they were extremely helpful when borrowing was required via special purchase vehicles, off-shore trusts and companies. They were very competitive for multi-currency loans. There is a limiting minimum loan of £150,000. After a lengthy absence Fortis have returned to the market place but with onerous loan conditions and mediocre rates based on Libor linking.
H. Heritable Bank
Unfortunately another victim of the Icelandic bank failures – part of Landsbanki. This is a shame - rather like Fortis they were a true “niche lender”, with first rate service, sensible underwriting and personnel who actually knew what they were doing. Whilst not having the sharpest rates in town, they were not far off the pace and there was plenty of add-on value to be had with this lender.
HSBC
Considering their high profile as “the worlds local bank” HSBC are remarkably feeble in helping customers with UK financing or refinancing. Whilst rates are competitive the bank seems so intent on selling every other service they have to offer that mortgage help takes a back seat. All sorts of restrictions impede the intending borrower and tales abound of initial agreement being subsequently reneged on. Mortgages only available to HSBC Premier customers holding £75,000 in investments/shares with the bank.
Halifax
The mighty Halifax, once accounted for 30% of the UK’s mortgage lending. Sadly Halifax Building Society decided they wanted to play in the bankers big pond, but like their other building society chums, Abbey, Alliance & Leicester, Bradford & Bingley, Northern Rock and Woolwich did not have the management expertise to swim with the big sharks. Now part of Lloyds Banking Group they have spells when they are very helpful to expatriate customers, and other times they are of no assistance whatsoever. Right now they are going through one of their helpful phases, but they still insist on odd criteria such as requiring a declaration that the expatriate borrower will have returned to the UK within three years from making their application! They can be particularly helpful to existing borrowers needing to move or achieve further borrowing, and that stance is much at variance with most of their competitors.
I. Ipswich Building Society
An old established (1838) UK building society and the only one making loans of any significance to British expatriates overseas. Now in their fourth year of expatriate lending via an exclusive IMP deal. They are particularly competitive for family occupation lending to expats. This can embrace many situations – parents occupying, wife/children whilst husband stays overseas, children studying at university and siblings needing assistance. Letting situations are also accommodated on ultra competitive terms. Rates, terms and service are consistently ‘best buys’. This probably reflects their mutuality existing as they do for the benefit of their members. They do not have a need to pay dividends or obscene bonuses to their senior personnel and directors.
L. Lloyds/TSB
Not so long ago they were very involved in the expatriate world via its overseas club and representation in most expatriate centres, particularly Dubai, Hong Kong and Singapore. In its previous guise, as Hill Samuel, Lloyds in Hong Kong truly had the Asia market “by the throat” There were indications of a drive to re-achieve that pre-eminence prior to their fall from grace in the recent banking crisis. Average lending terms can be countered by flexibility, currency options and the ability to offer terms in countries other than just the UK. Unfortunately our recent experience of the services of Lloyds in the UK has been abysmal for expatriates.
M. Mortgage Brokers
They should be able to access the entire, albeit limited, expatriate marketplace. They will certainly be remunerated by the lender, via a procuration fee and this could determine the arrangement fee they will usually charge. This could be anywhere between £250 and 1% of the loan but a good broker should be able to save an applicant serious money. By handling the processing of the loan proposal they can help avoid much of the heartache in dealing with lenders who seem intent on employing sales prevention forces.
N. Nationwide Building Society
Nationwide are the UK’s largest building society by far - an unhealthy six times the size of their nearest competitor. They behave like the worst of the banks and are absolutely no help at all with expatriates wanting to raise money for property finance, although they are extremely happy to accept expatriates offshore deposit funds. In taking over the borrowers of the Portman and Lambeth Building Societies they took on the loan books of societies that had actually been helpful to expatriates; in Portman’s case for many years. Whilst they have said that they will stand by commitments to those societies existing borrowers (and so they should and must) they refuse to allow any further borrowing for them and will not assist with changes of property if the new property is to be let. They have recently sought increases in interest rate from the Portman borrowers they acquired. This has been successfully refuted and countermanded. In the UK their service standards are dire.
P. Portman Building Society
Portman were probably the most competitive provider of expatriate mortgage funds via an exclusive IMP arrangement for over 10 years. Whilst the relationship wasn’t perfect it was better than most. Regrettably Portman borrowers now have to suffer the indignities of dealing with the Nationwide. At least the many hundreds who by default came out of their Portman discounts and fixes, are enjoying the benefits of Nationwide’s tracker rates which must be causing them considerable pain – 1.75%-2.5% are common deals in place with no end date, and with the ability to carry on letting. However no additional funding will be provided, and neither will a change of property if letting is to continue. Nationwide were seeking to increase rates by 1½% where borrowers had let for over 3 years. They have had to retreat from this as a result of IMP and ex Portman borrowers pointing out that they should not be disadvantaged by the Nationwide ‘merger’.
R. Royal Bank of Scotland
RBS were a major victim of the banking crisis but they continue to offer competitive terms to expatriates. Whilst their proposed major hub in Dubai has not materialized, and their Singapore operation has had periods of curtailment, thankfully their Guernsey office provides an excellent service. Whilst loans are limited to 70% of value, rates are good and the personnel in Guernsey provide an exceptional service standard. RBS are particularly generous when it comes to follow-on products for borrowers coming out of their initial deals. Right now they offer a 4% Standard Variable Rate with no early redemption penalties.
S. Scotland
Unfortunately expatriates wishing to purchase or refinance property in Scotland have a specially difficult time. Odd bearing in mind the huge numbers of Scots who inhabit all expatriate centres. Some lenders are unwilling or unable to cope with the difficulties presented by the differing Scottish legal and purchasing systems – daft! What an opportunity for a lender – we continue to seek one!
Stroud & Swindon Building Society
Britain’s 13th largest building society spent two years building up a £20m. expatriate book via exclusive deals through IMP. Their rates were best buys with a 2.3% three year discount from their standard UK buy to let terms. Obviously they found servicing expatriates too difficult, as lending terms have been withdrawn, and they can now watch their £20m. book walk away as the exclusive deal had no early repayment penalties. IMP have special remortgage arrangements in place, some with free or discounted valuation and legal fee offers.
Stroud & Swindon have recently been taken over by the Coventry Building Society who are taking a more realistic view in retaining the remaining borrowers who have not already refinanced elsewhere.
T. The Mortgage Works
Previously a subsidiary of Portman B S, now Nationwide. Their propositions were focused on buy to let lending, including loans for expats. Whilst their rates were not the keenest, they did have a whole range of products and at one time were able to provide an excellent service. They no longer lend to expatriates and are particularly unhelpful with existing expatriate borrowers in line with Nationwide’s stance
W. Websites
The expatriate homeowner buyer and borrower are newly empowered! They no longer have to rely on the sales pitch of the far away agent or developer and can consult specific websites, which will tell them the comparable sale prices of properties adjacent to that of their interest and environmental information, including the likelihood of flooding in the area of their interest.
www.google.com For mortgages there is no need to look further than Google, using the key words, expat mortgages, expatriate mortgages and expat buy to let.
www.zoopla.co.uk A new and very comprehensive property price comparison site.
www.nethouseprices.com This will let you know the sale prices property has achieved in the road that you are looking at. These prices are the actual figure paid as registered by the UK land registry.
www.homecheck.co.uk With a UK postcode the site will tell you about any environmental/pollution/flooding and subsidence risks to the property.
www.upmystreet.com is a useful agent’s site to see what property is on the market.
www.mortgageslaidbare.info The Financial Services Authority no nonsense guide to mortgages site.
In summary expatriate borrowers are treated as second class citizens who may as well be from Mars as Dubai or Hong Kong. It’s a frustrating business dealing with UK financial institutions from the UK – from overseas it’s a nightmare.
Most lenders flimsy defence to inability to lend to expatriates or the need to impose unfavourable terms rests on their unwillingness to pursue debt overseas. This totally ignores the fact that loans are only offered to a lower percentage than in the UK, and in the unlikely event of repossession the lender would probably take over an income producing asset. IMP have demonstrated for many years that the persistency of expatriate loan books is superior to domestic books.
The main banking groups, Barclays, HSBC, Lloyds, RBS and Santander, now account for over two thirds of lending in the UK. An unhealthy situation. Unsurprisingly this grouping also accounts for more than 90% of customer complaints! More competition amongst lenders is required which in turn could open up the expatriate market.
A further factor is that lenders’ underwriting procedures are now so geared to box ticking that dealing with expatriates with more complicated lifestyles than UK residents is just beyond the competence of most UK lenders. Looking back at the lending conditions prevalent twenty years ago there has been absolutely zero progress in this field of lending operations – pathetic really, and what an opportunity for a lender with foresight seeking to build a risk free, high quality loan book.
ADRIAN WRIGHT
International Mortgage Plans
Website: www.International-mortgage-plans.com
Email: info@international-mortgage-plans.com
