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Where next for UK expat mortgage rates?

The Bank of England has announced that the UK Base rate will remain unchanged at 5.25% for the second time in November. This decision aligns with the recent policies of the Federal Reserve and the European Central Bank, both of which have also maintained their rates this month. With such consistency in the market, there is now growing speculation that we may have reached the peak of the current interest rate cycle. The crucial question on everyone’s mind now is: When will the rates begin to decrease? Analysts suggest that this process is likely to be gradual, emphasizing a slow decline in the coming months.

Against this backdrop, there are notable developments in the UK mortgage market. Presently, expatriates can secure 5-year fixed-rate mortgages starting from 5.99%, while variable rates are available from 5.89%. However, qualifying for variable rates has become more challenging due to stricter stress testing requirements on rental income. To be eligible, the loan-to-value ratio must often be 60% or less of the property value.

Despite the challenges, expatriate mortgages and remortgages are expected to become more attainable, thanks to the robust rises in UK rental returns for expat buy to let landlords. According to the UK government’s Office for National Statistics (ONS), private rental prices paid by tenants in the UK surged by 5.7% in the 12 months leading up to September 2023, up from a revised 5.6% in the 12 months to August 2023. England experienced a 5.6% rise, Wales at 6.9%, and Scotland at 6.0% during the same period. Notably, London witnessed the highest annual percentage change in private rental prices at 6.2%, marking the highest rate since the data series began in January 2006.

These shifts in the rental market are expected to impact the housing and mortgage sectors, influencing the decisions of both lenders and borrowers in the coming months, making expat mortgages more attainable. The lending landscape is evolving, and stakeholders are advised to monitor these developments closely. Guy Stephenson from expat mortgage brokers Offshoreonline ends, “When the housing market turns, history suggests it turns very quickly. We expect housing prices to starting again soon, so for buyers waiting in the wings, now is a good time to secure initial approval for mortgage funding for their plans.”

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