Brexit, moving abroad and mortgage advice

While negotiations are still ongoing, there is no quantifiable answer as it could be several years before statistics reflect any downturn or upturn in the market. 

According to the latest European Mortgage Federation (EMF) review, it is still too early to say whether 2016’s shock vote to leave the European Union has had a drastic impact on people’s appetite for mortgages, either domestically or across Europe.

Its latest position paper: the Quarterly Review - Q4 2016, states: “Mortgage lending was distorted in the first half of 2016, as a tax change on second homes led to a big jump in activity before March 2016, offset by weak activity in the months thereafter.

“This made it difficult to say what the impact of the EU referendum in June 2016 had on the market. The fact is that during the summer there was a dip, likely to have been caused by the sharp weakening of consumer sentiment and increased uncertainty immediately after the referendum.”

As a knee-jerk reaction, there was an instant drop off, due to investor uncertainty. This is the view of Mark Posniak, managing director of Octane Capital.

"Brexit had an immediate impact on the international market last year, with many investors pulling out of purchases." 

However, he continues: "Since then the market has calmed down and the UK has started to look attractive again."

Brexit remains a long-term risk to the property market. With the UK leaving Europe there is an element of instability in Europe.  Mark Posniak

His comments are backed up by the EMF document, which explains that a large part of the consumer uncertainty dissipated soon after, as some of the political uncertainty was resolved, and the Bank of England announced a significant monetary stimulus package in August, to support the domestic economy.

So far, says Nigel Green, chief executive of the deVere Group, "there appears to be little change presently in the number of enquiries we receive for Brits wishing to buy overseas".

He explains: "There is very little evidence presently that suggests once the UK has left Europe, that Brits will no longer wish to buy abroad. With more than 1.2m Brits living in EU member states, I suspect there will still be a buoyant market."

Indeed, Julian Sampson, head of lending for TWM Solicitors, is of the belief there is little impact so far: "There has been no slowing of property transactions and interest by global funds in the UK property market remains strong.

"In many respects it is likely that the UK will continue its love affair with property and with property abroad."

Product offerings

Indeed, some European lenders have improved their product offerings and reduced rates in order to entice Brits to continue taking out mortgages. Daniel Howarth, head of Enness International, says: "Brexit has had little direct effect on international property investments other than passively, through the volatility of the exchange rate.

"Non-resident banks have made a concentrated effort to make international mortgage products more attractive to non-residents, to offset the uncertainty of Brexit on investors requiring finance.

"They have done this by decreasing their margins and offering more competitive partial interest-only and repayment products."

Long-term or short-term?

In the short-term, while negotiations are underway, there may be some short-term hiccups in the market, driven in part by sentiment, rising inflation, low interest rates, interventionist monetary policies and currency weakness.

In the long term, how much of an impact will Brexit have? David Bellingham, director and head of UK and Europe at IP Global, comments: "In the long-run we do not foresee Brexit causing any changes in the residential property market."

Mr Posniak is not so sure. "Brexit remains a long-term risk to the property market. With the UK leaving Europe there is an element of instability in Europe."

Residential or investment portfolio?

Brexit uncertainty has also created an increase in people looking for property as an investment rather than as a bolt-hole, according to Mr Bellingham.

Many investors have been looking overseas instead of the UK property market, and turning to other capitals for attractive property to put into their portfolios. 

Mr Bellingham says: "Notably, Berlin is proving to be a sound destination for many investors both from the UK and further overseas.

"This is due to its strengthened position for trade deals in post-Brexit EU and the relatively low-cost, low vacancy rates that are on offer for investors."

Two-way street

Meanwhile, overseas buyers have been eyeing up property in the UK since the vote to leave the European Union last year. As sterling fell during 2016 to a 168-year low, making the exchange rate far more attractive for foreign buyers, prospective borrowers started to look for suitable homes in the UK.

Due to changing criteria, buyers are finding it more difficult, unless they work with mortgage advisers who specialise in expat home loans for those who live outside the UK.Darren Mead

According to Mr Bellingham: "Internationals and expats have recognised the current opportunities to be had in the UK and their rate of investment has increased since the Brexit vote. Many looking for a chance to enter the UK's attractive property market have benefitted from a currency advantage, as the pound remains soft against the US dollar.

"However, those looking to take full advantage of the currency fluctuation should do so sooner rather than later, as experts predict the pound will return to a high position towards the end of 2017 and into 2018."

While this may be positive for investors, for residential borrowers, this optimism is not shared by Darren Mead, head of mortgages at the deVere Group, who believes overseas buyers and British expats could find it increasingly difficult to buy back into the UK if they do not have proper advice.

He comments: "Expats have been typically deemed as higher risk by UK lenders. Due to changing criteria, buyers are finding it more difficult, unless they work with mortgage advisers who specialise in expat home loans for those who live outside the UK."

Mr Mead has seen high-street lenders requiring some expat borrowers to receive a minimum of 145 per cent of their mortgage costs in rental income - previously it was 125 per cent.

"The change to lender affordability criteria could have potentially significant effects on the UK's property market for expat buyers if they are not made aware of this prior to making a mortgage application," he added.

simoney.kyriakou@ft.com