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Good news for expat UK house buyers, as expat mortgage rates start to ease

The successive and rapid series of UK Base Rate rises implemented by the Bank of England  are starting to take effect on the UK economy, cooling the labour market and easing inflationary pressures, according to the Bank of England’s chief economist, Huw Pill, commenting after the last UK Base Rate rise to 5.25% on 3 August. As a result, UK money markets are now pricing in a lower peak for UK Base Rate, which has allowed mortgage lenders in the UK to begin to reduce five year fixed interest rates.

Commenting on the development, Guy Stephenson of online expat mortgage brokers Offshoreonline said, “For the expat looking at the UK buy to let housing market, this could mark an important turning point. Whilst short term tracker and variable expat mortgage rates will rise to reflect the latest UK Base Rate change, longer term fixed rates such as five year fixed rates have begun to fall. Onshore, NatWest and other lenders have cut rates and we would hope this will feed into their international mortgage portfolio soon.”

Offshoreonline is reporting cuts of up to 0.3% to five year fixed rate expat mortgages for buy to let buyers which has brought some headline expat mortgage rates down to 5.99%.

Stephenson continues, “Rightmove and other property portals have consistently reported unexpectedly strong demand throughout the period of the rapid Base Rate rises. We believe that once the market believes we are close to the interest rate peak, sentiment could turn very quickly to favour the seller, with UK house prices likely to firm quickly.”

The Bank of England has raised UK Base Rate 14 times since December 2021 from an historic low of 0.1% to 5.25% this month. Whilst this has undoubtedly been a shock for many, UK Base Rate has in fact returned to the level it was in February 2008, just before the financial crash.

Having lived through over nearly 15 years of historically and abnormally low UK Base Rates, we are actually returning to more normal mortgage financing costs, believes Stephenson. As a rough guide, any mortgage rate which is around  1.25% above UK Base Rate is competitive, so that implies an expat mortgage at or below 6.5%, assuming UK Base at 5.25% , represent fair value.

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