New UK buy to let rules will impact expat property buyers

Contributed by, 09 January, 2017

• New expat buy to lending affordability thresholds introduced from 1 January

• But many expat buy to let projects will still pass the new tests

New rules on UK buy to let lending introduced by the UK/s Prudential Regulation Authority, part of the Bank of England, will limit the amount expat buy to let property investors and landlords can borrow on new mortgages from 1 January 2017.

The new rules are designed to slow the demand for UK buy to let investments by forcing buyers to contribute larger deposits. Lenders will now have to test affordability using notional interest rates of 5.5%, ensuring rental coverage of up to 145% of this figure is achieved.  In theory, this could mean a loan of £200,000 will need to be supported by a rental income of up to £1,328, but in practice the true figure is likely to be between £1,150 and £1,328, as there is some scope for manoeuvre on the part of lenders .

In the run up to 1 January, both expat mortgage brokers and banks reported a surge of activity, as buyers sought to beat the deadline. Guy Stephenson, a spokesman for expatriate mortgage brokers noted that "Large numbers of expat clients were pushing to register their mortgage application before the deadline of 31 December to avoid the new rules."

However, the impact on expat buyers might not be as harsh as on UK resident buy to let investors, who have hitherto enjoyed buy to let mortgage funding rates of at least 80% of the purchase price.

"Expat buyers have always had to contribute at least a 25% deposit", said Guy Stephenson., "Many lenders insisted on a 35% contribution. At these sorts of levels, the vast majority of expat buy to let projects will pass the new, tougher lending test and still make sense for the buyer", added Stephenson. recently began marketing new buy to let funding for expatriates from 2.79%.


Tags: interest | Offshore | expatriates | investment | offshore |



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