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Brexit need not harm the expat mortgage market, thinks Offshoreonline

With bookmakers Paddy Power offering odds of 3 to 1 this week that the vote to remain in the EU could be in the range of 45% to 50%, the odds look close. Should expats be worried? For those looking to take out an expat mortgage to buy a house in the UK, think that the vote is unlikely to have any immediate effect, but that if the UK did vote to leave, lighter touch and better targeted financial regulation might mean more lenders would remain in the expat mortgage market.
The EU has not shied away from issuing directives in the personal financial services sector, believing that banks need to be ever more tightly regulated. Its latest contribution, the European Union Mortgage Credit Directive, or MCD as it is widely known, has already had an impact on the expats around the world, causing at least two lenders to cease activity and withdrawn from offering expat mortgages.

MCD affects anyone who, for example is considering taking out a sterling mortgage to buy in the UK but whose main income is in another currency. The Directive has therefore impacted not just EU residents, but also expats globally, who are probably one of the largest groups in this category. As a group, expats tend also to be some of the best financially educated members the public, dealing as they have to regularly with currency exchange and receiving a salary in a foreign currency.

Guy Stephenson, a spokesman for, argues that this has had unforeseen consequences. “Compliance is a huge cost for UK banks and building societies and EU directives are a significant part of this. The larger banks can absorb changes to the regulations with relative ease, but for smaller building societies trying to develop specialist lending niches, such as expat mortgages, the challenges can be significant. Many simply can no longer consider the financial implications of changes to processes, so that new EU rules can be accommodated. We have seen at least two Societies go down this route in the last month, citing MCD as the reason why they will no longer lend to expats.”

The net effect of MCD, in the short term at least, has therefore been a reduction in choice and competition for expat mortgage customers, not, one assumes, what the EU wanted.

On a more positive note, reports that at least one building society has managed to accommodate MCD. It will be monitoring exchange rates and if these move by more than 20%, it will then write to its expat mortgage customers to help them resolve any currency risk they face. Fortunately, sudden 20% swings in currency are rare, so MCD might just be another example of new rules which just have to be accommodated in the longer term by us all.
March 2016

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