Expats wanting to take on new mortgages against their British homes will face a new set of tough lending rules under proposals from financial regulators.
One of the side effects of the UK adopting the European Mortgage Directive is the impact this will have on expat borrowers.
The directive is a template for mortgage lending across the European Union and includes many new rules aimed at giving borrowers more rights and clearer explanations of lending terms.
One of the fundamental aspects of the directive is making sure borrowers pass strict affordability tests.
Expats are likely to face an even tougher affordability test than other borrowers if they have a foreign currency mortgage.
Foreign currency mortgage safeguards
The Financial Conduct Authority (FCA) defines a foreign currency mortgage as a loan taken out in a currency other the one in the country where they live.
For example, an expat living in Spain taking out a UK mortgage in Sterling would have a foreign currency loan.
Proposals in the directive say mortgage lenders must make sure the borrower passes the affordability test while putting in place safeguards protecting borrowers against exchange rate risks.
Lenders will have to give expat borrowers clear explanations of how their mortgages will work under the directive.
“These options could be rights to convert mortgages into another currency or a cap on the borrower’s liability if exchange rate fluctuations reach certain limits,” said an FCA spokesman.
“As part of our consultation on the mortgage directive, we are asking borrowers, lenders and financial intermediaries what their views are on these safeguards.”
Warnings about bogus advisers
- Barclay Lewis
Dealing with an unregulated firm
If you buy shares, save money or invest with an unregulated firm, you lose any protection offered by the Financial Ombudsman and the Financial Services Compensation Scheme. Broadly, you have no independent place to complain if the deal goes wrong and are unlikely to win any compensation.
Checking if a firm is regulated
Go to the Financial Services Register to check if a firm is regulated in the UK.
Reporting a suspected bogus adviser
Find out how to report unauthorised advisers on the FCA web site
