SPECIAL FEATURE: The best of both worlds

Mortgage Introducer

December 10, 2015

There may never be a better time to tap into the overseas mortgage market, says Clare Nessling

With advanced weather models predicting months of snowfall and the worst winter in a half a century, you couldn’t blame people for dreaming about owning a place in the sun. But bargain prices, historically low interest rates and a strong pound mean that it could be more than just a dream. It may never, in fact, be more affordable for your clients to invest in a little slice of life overseas.

Sterling has recently been hitting seven-year highs against the euro, which means that tens of thousands of pounds are being lopped off property prices in the euro zone. And buyers, full of fresh optimism, are heading overseas in search of opportunistic bargains. A €200,000 property, for example, is now around £14,000 cheaper than it was this time last year, and more than £17,000 cheaper than 18 months ago, showing just how much difference the currency markets can make.

These conditions are creating the perfect storm for overseas property investment. It’s a great time, therefore, to consider the overseas mortgage market as a lucrative new revenue stream.

Viva España

Spain is back in the top spot when it comes to buyers’ preferred location, accounting for 40 per cent of our enquiries over the third quarter of this year, and almost half (46 per cent) of those received over January to September. There’s no doubt that the country’s appeal was tarnished following the property crash which saw prices in some of the most desirable areas fall by up to 50 per cent. But, following a nightmarish few years, the property market is on the up at last and British investors are regaining confidence in this recovering market.

According to the latest figures from the General Council of Notaires, sales in Spain increased in September by 8.7 per cent, house prices rose by 1.7 per cent and the number of new mortgage loans granted grew by 17.4 per cent. Data from property registrars show that there has been an increase in foreign buyers, who purchased 13.5 per cent of properties sold in the third quarter compared with 12.8 per cent in the second quarter. And Britons are the most prolific investors, accounting for 23 per cent of sales.

Hot on Spain’s heels, however, is France which appears to be making a bit of a comeback, taking a 38 per cent share of our enquiries over the third quarter and actually overtaking Spain for two months.  A sluggish market combined with the lowest mortgage rates in more than 60 years are making it affordable than ever to snap up a property across the Channel. And buyers are taking full advantage.

Market research agency Standard & Poor’s expects the French market to stabilise in 2016 and begin a slow increase in 2017, which is good news for anyone thinking of entering the market now.  Current market conditions are, in fact, very good for prospective buyers, with some excellent deals to be made. And there’s plenty of room for price negotiation with some very motivated vendors.

In third position is Portugal, where more upbeat economic news and attractive property prices have provided a boost to investors’ confidence and this is leading to an increasing number of buyers coming back to the market in search of opportunistic bargains. Over the third quarter it accounted for almost a fifth (19 per cent) of enquiries, and 16 per cent over January to September.

Availability of finance

There’s no getting away from the fact that overseas lenders have tightened their mortgage eligibility criteria in recent years, but they’re still willing to lend to UK buyers, especially if they can prove that they have a sound financial profile and a healthy deposit to put down.

As overseas mortgages are unregulated, there are fewer barriers to an intermediary seeking out openings in this market, but it’s a completely different ballgame to the UK market and understanding the process in each country is crucial to ensuring that a client’s needs are met without incurring any costly errors. That’s where specialist brokers come into play.

In one recently referred case, the process of securing a French mortgage took four months and there was a lot of paperwork and administration involved. That’s not unusual, of course, but having someone take care of the process can really take the pressure off. There was one issue towards the end, which involved the French lawyer having to track down the previous tenant of the property in question to offer them first refusal of the purchase, a legal loophole that the mortgage broker would never have been aware of had they not approached the experts. Thankfully, this ended up being just a formality as the previous tenant was not interested in buying the property and the buyer could therefore tick that legal box.

Many intermediaries have avoided this market simply because they’ve been unsure about how to tap into it. But numerous brokers have become involved as the result of a single client enquiry, and then been surprised at how easy the process is and become more confident about taking on more. So, although it can appear quite daunting, it’s a simple case of passing over to the experts which means that you can earn valuable commission while getting on with the day job. The best of both worlds, you could say.

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