Credit crunch advice for expat house buyers

The credit crunch is now hitting home in a way which few would have forecast in the days after Northern Rock crisis first hit the headlines. As the wholesale money markets have continued to demand a premium rate for loans between banks, the source of much of the UK mortgage market’s funding, so lenders have been forced to react by withdrawing from the market or raising interest rates on their mortgage product range.

According to the comparison site Moneyfacts, 22% fewer mortgages were on offer In April compared to March, reducing still further the choice available to borrowers who have been hard hit by the withdrawal from the market of First Direct, Coop Bank and Northern Rock and elsewhere the significant tightening of lending terms imposed by the giant Halifax Bank of Scotland Group

For those expatriates who are coming to the end of a fixed rate mortgage, or those who are planning on returning to the UK and need to consider home finance, these appear to be worrying times.

Tim Harvey, managing director of specialist UK regulated mortgage brokers Offshoreonline.org comments, “Upwards of one in three housing deals are now falling through, as buyers struggle to find finance. For those needing to remortgage at the end of affixed rate term, the choice can also look stark: Endure the high standard variable rate imposed by your existing lender or risk refusal elsewhere. “

There is also some evidence of overseas brokers using the general air of pessimism to overpromise and exaggerate the financing options open to borrowers, so to avoid the problems of a lost sale, buyers are urged to speak to UK regulated brokers, so they do not suddenly find themselves disappointed at the 11th hour.

Tim Harvey continues, “We have noticed an increase in enquiries from expatriates who have been promised apparently attractive loans from large lenders who have never been in this market. For the buyer, they have to go through the whole application process, only to have the loan request rejected as soon as it is submitted. We use a panel of lenders, all of whom have a long and proven track record in this market, so customers know where they stand from the outset.”

But it is not all bad news. With this dramatic fall off in demand, sellers have had to suddenly be more realistic with asking prices, as the balance of power has swung definitively back to the buyer. Equally, many surveyors are now valuing houses at anything from 10% to 15% below the advertised price, according to one estate agency chain, Savills. For the expatriate buyer then, these could be good times to re-enter the market, as prices are falling and buyers are far more open to good quality offers.

Tim Harvey explains, “Most of the fall out in the mortgage market has been in the subprime category, i.e. those deals which were based on 100% mortgages or where the applicant could not easily prove income. For expatriates, neither of these situations have never been an option. Most lenders will request a 20% deposit and either proof of salary or two years report and accounts for the self employed. For our customers over the years, that has been the norm, so as a result, we are not having any trouble placing client business, whether for new purchases or remortgages.”

The post credit crunch message for the expatriate house buyer is therefore clear. The balance of power has swung back in the favour of the buyer, but in order to maximise this advantage, buyers have to be realistic and be prepared to commit to a 20% deposit to guarantee their mortgage.

For more information, visit Offshoreonline.org.