Upcoming buy to let mortgage restrictions may hit expat investors

Published:  25 Mar at 6 PM
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Once a favourite with expats looking to earn from their retirement nest eggs, buy-to-let mortgages for UK properties are facing a new crackdown.

In addition to the planned punitive increase in stamp duty due on buy-to-let properties and second homes, George Osborne is warning that a further crackdown is fast approaching due to fears of an artificially overheating market. Osborne stated the Bank of England will be granted powers to restrict the availability of buy-to-let loans.The market is as attractive to UK-based investors as it is to expats looking for decent return on their savings, with any further restrictions likely to cause chaos.

February’s total of approved mortgages stood at 79,428, a 20 per cent increase on figures for February 2015, with experts suggesting a surge in buy-to-let loans as the likely cause. Although it’s become ever more tricky for expats to source a buy-to-let loan due to the withdrawal from the market by a number of major lenders,, it’s still one of the most popular ways to avoid the measly interest rates on offer from banks.

Keeping a foothole in their country of origin by means of a second home or buy-to-let property is another reason for the popularity of this investment, along with the expected capital gains on selling in the future. However, expats who’ve lived overseas for longer periods often have problems getting mortgages due to lenders’ reluctance to loan to non-resident/ non-domiciled UK citizens. Credit checks can also cause problems, with the majority of UK banks unwilling to go to the trouble of verification.

Another blow came with the news last May that expats would no longer be exempt from capital gains tax on property sale profits. Together with taxes, refurbishment and maintenance costs, agents’ charges, tenancy breaks and insurance costs, any further crackdowns by the UK government are likely to kill the goose and its golden eggs for many thousands of expats who rely on their buy-to-let returns to supplement their UK state pensions.
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