Will the rising cost of living benefit expats and foreigners looking to buy homes in the UK?

Posted on Tuesday, March 8, 2022

The rising cost of living in the UK may increase the availability of homes for UK expats and foreign nationals to buy, a mortgage brokerage has said.


“With increasing energy rates, the rising cost of living and rising interest rates, some homeowners will have no choice but to sell. This means that there will be an increased supply of properties, lowering prices and increasing availability for those utilising UK expat and foreign national mortgages as they’re excluded from the effects of the rising cost of living,” Stuart Marshall, director at Liquid Expat Mortgages, said.

The cost of living in the UK has risen, with food prices soaring as a result of inflation reaching 5.4%. Energy bills are also expected to rise by 54% to an average of £1,971 as Ofgem increases the cap on prices that energy companies can charge.

According to Liquid Expat, the pressure will continue to rise for those living in the UK with interest rates set to peak at above 7% in April.

Marshall said that as house prices are rising to record-high rates, first-time buyers may find it difficult to graduate from the rental market into home ownership.

“House prices have consistently risen faster than wages over the course of the pandemic but the rising cost of living and continued high house prices will only add to the difficulties for first-time buyers living in the UK. In fact, Nationwide reports that a 10% deposit on a first-time buyer home would now account for a record 56% of their gross annual wage,” he said.

In the latest House Price Index report by lender Halifax, February 2022 recorded an annual house price growth rate of +10.8%, which is the steepest house price increase since June 2007.

“It’s something we discussed last year but the situation is only worsening for domestic first-time buyers. Further, there are still those who sold houses during the heights of the lockdown housing market that are struggling to find a property to move into, often caught out by the inflated prices of properties and the stiff competition from those with more buying power,” Marshall said.

He reiterated, however, that UK expat and foreign national investors using UK expat and foreign national mortgages will be shielded from many of the inhibiting factors that are affecting domestic buyers.

“UK expats and foreign nationals investing in the UK property market are slightly sheltered from the concerns of domestic buyers by the fact they are not paid in sterling. We have seen this in the past when a weaker pound has reduced domestic buying power compared to non-UK buyers, who are

often paid in dollars. The current inflation rate, and the 7% rate anticipated in April, then will not affect UK expat and foreign national investors in the same way that it will affect those in the UK, thereby increasing their comparative buying power,” Marshall said.

“Another important factor to take note of is the rising interest rate. A lot of the lenders that are currently in the UK expat and foreign national mortgage marketplace are not passing on the rising base rate to the consumer. This is likely because the UK expat and foreign national mortgage market has proven itself to be an incredibly lucrative place for lenders.

“Consequently, lenders need to remain competitive to stand out from the crowd and attract business in a growing pool of offers. Because of this, UK expat and foreign national mortgage rates aren’t likely to increase in the same way that domestic rates will. Many existing UK expat and foreign national mortgage holders will also be able to take advantage of these deals by remortgaging when their loan reverts to a higher standard variable rate.”

Via @MortgageIntroducer