Expat Property Update
A benign UK economy, with attendant low interest rates, has meant a happy time for expat mortgage borrowers, even if they have seen neutrality in capital growth terms. Certainly, the doom mongers of a year ago, forecasting imminent falls in values of as much as 30%, have been noticeably reticent in repeating their negative forecasts.
Major UK house indices reporters, Halifax and Nationwide, have continued to report conflicting evidence of minimal house price movements. Their reporting, anyway, only gives the broadest brush picture of what is happening in a situation where local variations have been extreme. Areas previously lagging in the growth stakes, such as South Wales, Devon and Cornwall and industrial cities like
Liverpool, Leeds and Manchester, have all seen very significant growth, although values may now be settling in those locations, with a possible oversupply of units sold for pure investment.
So, a broadly happy time for borrowers - how have lenders fared and reacted to the "quiet times"? Overall, purchase-lending levels are significantly down, reflecting a public wariness in respect of over committing themselves and judicious manipulation of the base rate by the Bank of England, whose actions have been beneficial to the economy generally and to homeowners specifically.
International Mortgage Plans (IMP), leading UK suppliers of expatriate mortgage finance, who constantly research and appraise lenders' terms, report a movement to impose "stealth charges" on borrowers, rather than relying on the transparency of interest rates.
Lenders have seen their margins squeezed by lack of demand and increased competition; the public are increasingly aware of the differences in terms offered by lenders but, whilst inertia is still surprisingly prevalent amongst borrowers, media education is gradually having its effect. Lenders aim is to ensure that borrowers will, after an initial low rate honeymoon, stay wedded to them on their
standard variable rate for a significant and, for the lenders, a profitable period. Existing borrowers subsidise new borrowers. Lenders do not like "rate tarts", those savvy enough to explore alternatives, when their introductory terms finish, or those mortgage brokers who systematically "churn" their clients between lenders, to take advantage of new deals and new procuration
fees. IMP consider that it is not worth changing lenders for a .25% advantage, .35% is marginal but .5% well worth looking at, in terms of refinancing.
Lenders have acted to counter the loss of borrowers by ever-increasing charges attendant on repaying a loan. Average fees for redemption were around £75 until recently. In a heavily criticised and high profile move, Alliance & Leicester increased, what they call, their redemption administration charge, to £295. Other lenders, including Abbey and Halifax, who have a very high percentage of
market share, were quick to raise their own "exit fees" to £225. Many other lenders have followed suit.
Lenders' avarice has not been limited to exit fees. There is a general move towards much higher entry fees. Only a year or so ago, initial arrangement, or product fees, could be measured in the low hundreds - typically, £295. These fees have now been jacked-up to £599 to £699, or even more on some specialist products. A latest marketing ploy is to offer low headline interest rates but entry
fees as high as 1.5%. Presumably, lenders uncertain of the likely persistency of their loan book want to make sure that they get their profit early!
An average £200,000 remortgage could now cost as much as much £1800 in attendant costs viz:
|Existing Lenders' Exit Fee
|New Lenders' Application Fee
|New Lenders' Valuation Fee
|New Lenders' Arrangement Fee
|Solicitor's Costs, including disbursements
It is going to need a significant saving in costs to make a change of lender beneficial under those circumstances - at least ½% on rate for two years. Having met the lenders' rapacity, there could be additional costs via the services of a mortgage broker, who often have exclusivity on the best deals. Whilst some brokers, including International Mortgage Plans, charge a modest .25% on loans,
there are still plenty of high profile intermediaries prepared to charge anything between ½% and a staggering 1%, or more, for their time and expertise. IMP's maximum charge is capped at £500.
Thankfully, some lenders have come to the rescue of intending remortgaging customers, with the availability of special schemes, defraying valuation or legal costs, via special switching packages. Mortgage brokers will be aware of these special packages - one thing is for sure, you will not hear about other lenders' advantageous deals from their competitors. Provided the ½% interest rate saving in
costs can be achieved as a benchmark, swapping one lending devil for another, can be worth the time, hassle and money involved but the lenders know their new strengths and will be guaranteed to continue tightening the screws!
Expats wishing to compare their own loan packages with current availability should click on IMP's website at www.international-mortgage-plans.com which gives an overview of the current market place, lenders comparable terms and incorporate a cost and commitment free 24 hour acceptance in principle service.
International Mortgage Plans are regulated by the Financial Services Authority our registration number is 302775. We hold consumer credit licence number 504524. Buy to Let mortgages are not subject to the new regulatory regime.