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Expat Investor : August 2009
EXPATRIATE MORTGAGES Lender Bank of Scotland International Barclays Wealth Halifax NatWest International NatWest Mtg Service Royal Bank of Scotland Royal Bank of Scotland Int 4.99 3.5 4 4 4 4 EXPAT MORTGAGES in association with EURO MORTGAGES Rate % Max. % Fee N/A 80 80 75 70 85 85 70 Notes 0.5-1% Varies Varies 0.75-1% £299-£1499 £299-£1499 0.75-1% Lifetime tracker and fixed rates available Fixed, tracker and SVR Standard mortgage range Fixed and tracker rates. Min £50k Standard mortgage range available Standard mortgage range available Fixed and tracker rates available Figures compiled: 3/6/09. Source: MoneyFacts www.moneyfacts.co.uk Expatriate = UK residents working abroad short-term and buying a property in the UK. Lender may allow property to be let. Lender Notes Bank of Scotland International Rate linked to EURO LIBOR + 2.90% with option to set rate for 3, 6, 12 months. Max 70% LTV. Interest only or capital repayment. Min £500k. Max term 20 years. Arrangement fee up to 1%. Redemption charge applies. Rates also available on same terms in US dollar, Swiss Franc, Japanese Yen and HK dollar. Barclays Bank Rate linked to Barclays Bank 3 month LIBOR rate applicable for a 90 day interest period. For house purchase only. On an interest only basis, max 65% LTV, advance £500k, term 5 to 20 yrs and fee 0.5%. Redemption charge applies. Barclays Euro Current Account required. Rates also available on same terms in US dollar, Japanese Yen, Swiss Franc and Hong Kong dollar. Investec Private Bank Leeds Building Society Rate is based on EURIBOR +1.25% to 2%. Max 70% LTV. Upfront fee of up to 1%. Min adv of £1m in euro equivalent. No redemption fee penalty. Also available on same basis in US$, Swiss Franc Japanese Yen. Managed multi-currency also available. Irish € product. Fixed rates available. Max 70% LTV. No fee. No redepemption penalty payable. Rates linked to Euribor available: Euribor + 3.00% for term. Max 50% LTV. No fee. No redemption fee. Euribor + 3.25% for term. Max 70% LTV. No Fee. No redemption fee payable. Mortgages for borrowers who are paid in euros to purchase or remortgage their main UK property Source: MoneyFacts OVERSEAS PROPERTIES Lender Banco Halifax Hispania HSBC Investec Private Bank Leeds BS Lloyds TSB Newcastle Building Society Norwich & Peterborough BS Royal Bank of Scotland International International Private Finance Source: MoneyFacts Location Spain France, Spain, Malta France, Italy, Spain, Portugal, Monaco & Guernsey Gibraltar, Spain Gibraltar & Southern Spain Southern Spain France, Spain, Portugal, Italy, Florida, South Africa, Australia, NZ. Currency Euro Euro, Maltese lira or selected major currency Sterling, euro, Sterling, euro France, Spain, Portugal, Australia, NZ, Canada, US, Dubai, Hong Kong, Singapore & UK Gibraltar Currency of choice Sterling Sterling Euro, sterling Euro, sterling, US dollar FOREIGN CURRENCY LOANS Lender Bank of Scotland International Barclays Bank Investec Private Bank NatWest Offshore RBS International Location UK property UK property UK & selected European property UK property UK property Currency switching allowed on all major currencies Source: MoneyFacts Investors snub banks and shares in favour of property auctions Chris Baguley, director of short-term lending specialist Auction Finance Limited, discusses why increasing numbers of expats are choosing to invest in property rather than leaving their cash in low-rate bank accounts. During the boom years of the past decade, thousands-upon-thousands of British homeowners incurred credit liabilities that bore no relation to their earnings ability. Spurred on by increases in house prices, average unsecured borrowings soared to £30,000-£40,000 per household. The spenders’ ‘backstop’ position was that a re-mortgage or house move would solve any financial crisis at a stroke. As we all know, the bubble has burst, with the result that both residential and commercial property values have dropped significantly. In the scramble to recover their security, lenders are repossessing and auctioning property at almost unprecedented rates; conversely, the restricted availability of mortgage finance means that, despite falling prices, many would-be home buyers are being thrust into the rental sector and swelling it. Therein lies an opportunity for liquid and financially agile expats. When interest rates are low, money is a relatively cheap commodity. Recent figures released by the Essential Information Group, the recognised authority for data on UK property auctions, reveal that in March 2009 the average rental yield for property bought at auction was 9.02%. In contrast, the average savings rate on an instant access bank account now stands in the region of 1.01% AER. This means that someone with £100,000 in the bank currently earns an average of just over £1,000 a year gross interest, but if they’d put the money in property they could enjoy a return of £9,020 a year in rental income. David Sandeman, managing director of the Essential Information Group, comments, “We’ve recently seen a divergence between and AST yields and savings rates. AST yields have gone north of 8% whilst savings rates have plummeted, and the cost of borrowing to fund an investment property is also coming down. Anyone who derives their income from interest on savings is therefore much better off putting the money into bricks and mortar. “Investors turning to property are taking advantage of the bargains they can snap up at auction. During March 2009, several auction houses reported sale rates of more than 90%. For example, new London auction house mustbesold.com shifted 91% of the catalogue at their auction on March 3rd, and significant numbers of auction houses are achieving sales figures of around 70 or 80%.” Ongoing rate cuts mean long-term mortgage finance has actually become more affordable for those in a position to secure it. This makes it much easier to service the mortgage repayments on an investment property out of the rental yield. Those with sufficient capital to invest may well be able to pocket a decent proportion of the rental return for themselves, and more and more people are crowding the auction rooms to put their savings into property. Another important attraction of the current market is that anyone buying now can look forward to the capital gains that will result when property prices begin to recover, and if predictions that the residential market will reach bottom in 2009 are correct, then this is the optimum moment to buy. Remote buying A little judicious research reveals just how easy it is to acquire property remotely. Surveyors and valuers are happy to take instructions by phone or online, so prospective investors can have the benefit of their experience and local knowledge before bidding on the phone. Letting agents can act for absent landlords irrespective of their domicile. Conveyancing lawyers, similarly, are equally happy to receive instructions from abroad. Provided you understand the auctioneers’ rules, the legal consequences of the hammer falling and the mechanics of moving money internationally (as most expats do) the process is relatively straightforward. It will make matters a great deal smoother if you have developed an ongoing relationship with a reputable auction finance provider. Use of this service will buy you time to marshal your finances and move your money around whilst providing the cash you’ll need to meet the vendor’s legal completion date, which can be as little as seven days after the auction. Your overseas location should not be a problem for a financier provided you have a UK bank account and the assistance of a competent firm of solicitors who can witness your signature on any documents. Supply and demand Obviously, it will take some time and effort to put these arrangements in place from an overseas location, but once they are in position, you’ll be free to play a market that many believe is ‘bumping along the bottom’ again and again. The ultimate criterion with property is that eventually demand will always outstrip supply, and the well- publicised downturn in construction means the supply cycle has been seriously interrupted. Badly shaken investors everywhere are looking at different ways to get a better return on their capital than the traditional routes, especially investments that offer the prospect of a competitive income return now and growth tomorrow. There is a strong case for considering rental property at auction back in the UK. Thousands of lots are reaching the market each month, and information about most can be accessed on-line. There are undoubtedly bargains to be had. 22 EXPAT INVESTOR ? July/August 2009 expatinvestor.com
May June 2009
September October 2009