The overseas mortgage market could provide a valuable new source of income, says Clare Nessling
After one of the wettest winters on record and an exceptionally cold start to spring, you couldn’t blame people for dreaming about owning a place in the sun. But bargain prices and historically low interest rates mean that it could be more than just a dream, and it may never be more affordable for your clients to invest in a little slice of life overseas.
It appears, in fact, that the Brits’ love affair with overseas property is very much alive and well, with Rightmove Overseas reporting record traffic in March, with 5.4 million searches performed on its website.
Property prices overseas are at their lowest for many years, giving excellent opportunities for an investment or change of lifestyle abroad. According to The Overseas Guide Company, France is still the most sought after country in which to live, closely followed by Spain and Florida. Our own enquiry figures show a similar picture, with the new overseas property hot spots being the old favourites of France and Spain, as investors stick to locations they know and trust.
OGC says that prices in these countries are at an all time low so an astute buyer could secure an exceptional property which should in due course, rise in value. The pull of the lifestyle in these countries, the weather and easy accessibility with good flight connections are also important.
And mortgage rates are low too. Euribor, the index used throughout the eurozone to set mortgage repayment terms, has been reaching historic lows in recent months, and is expected to remain low for some time to come.
That’s all very well, you might be thinking, but how easy is it to obtain finance? There’s no doubt that the recent banking crises and economic gloom, across Europe in particular, have taken their toll on the international mortgage markets. But although banks have generally become more cautious about lending to foreign investors, there are still financing opportunities.
Due to its financial system having been cautious in the past, the French mortgage market has remained pretty calm. As it’s in a relatively secure situation, it’s possible for clients to borrow up to 75% of the value of a property with an interest-only mortgage and up to 85% with a repayment mortgage. France currently offers the widest range of finance options and best available rates in Europe.
The Spanish property market has experienced a turbulent few years, but with prices dropping by up to 50%, and with mortgage rates from just 3.21%, it’s a buyer’s market. Unsurprisingly, mortgage availability isn’t as good as it was a few years ago, but there are still opportunities, especially if your client has a healthy deposit to put down, and you can generally borrow up to around 65-70% of the value of the property.
One of the biggest recent changes in the overseas mortgage market is that lenders are no longer using such set criteria for decision-making – it’s much more down to the individual case. This is where tapping into a specialist broker can really help.
There are plenty of British buyers who are more willing to explore overseas opportunities in their search for better investment potential. And with a Mintel Research report from last year revealing that one in three Brits are now contemplating emigration, there are many people who are planning to retire abroad or to live permanently overseas.
It’s also crucial to remember that although some of your clients may already own property abroad, they may not have considered remortgaging.
Generally speaking, confidence appears to be picking up, and buyers who have been putting off their plans to buy abroad are taking advantage of the favourable conditions that are open to them.
When sterling is weaker against the euro, there could be an opportunity for clients who think they don’t need a mortgage. Their immediate exposure to currency fluctuations is much lower than if they’re paying by cash, as they’ll only have to exchange the money for their deposit and fees for now. If they’re lucky enough to be a cash buyer, it may be appropriate to arrange a mortgage for them until sterling becomes stronger, and ultimately reduce the price they pay for the overseas property.
Clare Nessling is director at Conti