Expats have suffered another mortgage blow as Britain’s biggest building society has decided to decline home loans to anyone who has lived overseas at any time in the three years before making an application.
The Nationwide is the latest lender to bar expats from borrowing against a property in the UK, leaving few in the market.
The issue for lenders is checking out the financial histories of expats.Credit bureaux in the UK only keep records tied to addresses within the country. They lose track of anyone that moves abroad for a lengthy period.
This means an expat may have a poor credit history in another country that is not revealed to a UK lender as no framework is in place for swapping personal information due to privacy and banking laws.
Niche lenders
Other lenders like Aldermore Bank and Barclays have a similar rule – but with a 24-month time limit.
The Nationwide and other lenders are also tightening up rules for UK borrowers.
For instance, a range of guarantor loans offered by subsidiary The Mortgage Works have been withdrawn and the building society is said to be refusing applications from more than two applicants for loans against the same home.
Losing these options also affects expats, as guarantors with a proven UK credit history could have helped some borrow while living overseas.
A few international branches of banks will consider UK mortgages for expats.
The biggest player in the market is probably NatWest International.
Niche lenders will also consider applications on a merit basis. Shawbrook Bank is one.
Tax consequences
However, many have minimum loan sizes and require hefty deposits of up to 40%, so matching a loan against a property may mean missing out on the preferred option and having to go with second best.
If a remortgage is wanted for home improvements, then looking for a further advance from the current lender may be the best route as they already have a financial history of regular mortgage payments to consider.
The final option is a secondary lender. These firms often offer bridging or private loans, but the downside is they can come with eye watering fees and a high interest rate as they realise they have expats in a captive market.
The other major consideration of buying a UK home as an expat is the unexpected tax consequences.
HM Revenue & Customs may regard having a home in the UK as financial tie that negates non-residence and brings an expat back into the UK tax net.
