Expat UK property investing: Three positive signs, thinks broker

Three positive signs for UK Property Investing – 2022

Set against the background of sterling’s relative collapse and the news of rising UK Base Rates, it might seem hard to see an upside to being a UK mortgage investor, but expat mortgages broker Offshoreonline sees reasons to be cheerful.

“Since 2009, the UK Base Rates have been at historically and totally unrealistic lows”, says Guy Stephenson of expat mortgage brokers Offshoreonline. “Inevitably, UK base Rates would have to rise, but commentators have consistently avoided this awkward truth.”

But with the banks and building societies now updating their interest rates, a small but significant change can be seen, one which ironically the banks have remained quiet over.

Pre the 2009 crash, lenders would typically aim for a margin over UK Base Rate of around 1.25%, but as banks had to rebuild balance sheets following the 2009 crash, this margin leapt to a figure which was sometimes over 4%.  “As brokers,  we have long felt this was an excessively high margin for a mortgage holder to pay, especially since the practice continued long after banks had returned to balance sheet health”, said Stephenson.

Now at least one expat mortgage lender has announced a Base Rate tracker with a headline margin of just 1.99% over UK Base Rate, marking a significant improvement for those with expat mortgages.

Stephenson continues, “Building societies too have reduced the margin they charge on variable rates, so we can still find expat mortgages at close to 4%.”

The second less obvious change results from the change in value in Sterling against both the US dollar and currencies pegged to it, such as the UAE Dirham. Since the start of 2022, Sterling has fallen from around $1.36 to the pound to $1.13, a drop of around 17%. For the expat property buyer based in the USA, Middle East or Far East, this is effectively an immediate and significant reduction in the cost of buying sterling. “As a result of sterling’s  fall, we are recommending that expat buy to let investors paid in US dollars or any currency pegged to it should consider making a partial redemption of capital to reduce the amount they owe UK lenders,  which in turn will help offset any increases in interest rates” adds Stephenson.

Finally, Stamp Duty changes are helping expat property buyers who used to pay the tax on homes priced above £125,001. Following changes announced and retained by the new UK government, no Stamp Duty is payable below the new price threshold of £250,000, whether the house is intended as a buy to let or main home.

According to Rightmove, a property portal, this means a third of all UK homes currently for sale are now completely exempt from Stamp Duty in England, compared to 7% when the threshold was £125,000.

Whilst higher rates of Stamp Duty are payable by all UK property buyers investing in their property portfolio after their second and subsequent homes, such purchases will still benefit from the new higher threshold at £250,000.