Why is it so hard for Yacht Crew to get a Mortgage?
You want to buy a property in the UK, you have been saving the deposit and are ready to commit to buying. You think to yourself getting Yacht Crew Mortgages should be easy, I earn a stack of money, pay next to no tax and have very few real outgoings, the Lenders are going to love me, right?
Wrong! Lenders pulled out of Foreign Currency Mortgages 2-years ago which has had a big effect on Yacht Crew mortgages. We thought it was about time we explained why.
What is a Foreign Currency Mortgage Anyway?
You earn in Dollars or Euro, or another currency and you want a UK mortgage in GBP, then you need a Foreign Currency Mortgage. You are a Foreign Currency borrower even if you live in the country and your wages are paid into a bank account in the country.
To make things even more difficult, if you are relying on the ultimate sale a foreign currency denominated investment or property to repay your new UK mortgage then this makes the mortgage a Foreign Currency Mortgage even if you are paid in GBP. This would also apply if some of your income was say, from a Spanish Investment Property you hold.
Where have these Changes Sprung from??
You guessed it, the EU, more specifically The Mortgage Credit Directive (MCD) which came into effect April 2016. This 300+ page document changes all sorts of regulations and conditions of the Mortgage Market in the EU. Specifically, it mentions Foreign Currency Mortgages as below:
“Where an MCD regulated mortgage contract relates to a foreign currency loan, […] the MCD mortgage lender must ensure:
• The consumer has a right to convert the MCD regulated mortgage contract into an alternative currency under specified conditions; or
• There are other arrangements in place to limit the exchange rate risk to which the consumer is exposed under the MCD regulated mortgage contract.”
The result of this in the real world of Yacht Crew mortgages is, if you take out a Foreign Currency Mortgage and the exchange rate between the two currencies concerned varies by more than, say, 20%, you effectively have the right to insist that the Lender moves your mortgage to the other currency, this is particularly relevant when the mortgage has therefore become unaffordable. The lender could alternatively agree to cap your risk to say a 20% fluctuation. But if you think this through how many lenders in this day and age are going to agree to share the risk? Not many is the answer despite the fact that they are far better placed than you or I to hedge their currency risk.
Many lenders are simply “opting out” of Foreign Currency lending as a result, quoting the new rules making it “not cost effective” to manage currency risk. This applies to both residential and buy to let mortgages.
All in the Name of Consumer Protection
Up until BREXIT a 20% fluctuation in currencies may have sounded a lot. However, even before Brexit Euro / GBP moved from 1.17 to 1.44 between late 2013 and Mid 2015 (the position now having swung back again with Brexit with GBP / EURO at 1.14 this morning (23.04.18)).
If you work these figures through where your original mortgage repayment was say £1200 pm. Your cost in Euro would have been €1404 increasing to €1728 then falling back to €1368 again today. A fluctuation of 21% or so. This would have triggered the lender to have to offer you the chance to change currency or for them to swallow some of the fluctuation as per the new MCD Rules.
The Result of This
Even before Mortgage Credit Directive quite a high number of UK Lenders would only ever lend in GBP and the extra administration burden of handling what is for them a small percentage of Foreign Currency Mortgages seemed too much of a pain. With the additional burdens and risks added by the new rules even more have simply “opted out” of lending. Result, Yacht Crew mortgages almost became extinct.
You would think that the Pan-European banking groups would be the main players here but even they are shying away from the additional burden or appearing via their marketing to be in the market but when you check their Mortgage Criteria you find so many hurdles and stress tests that the loan is unattainable or reduced greatly from what you may expect.
In our experience it is the more flexible, smaller Building Societies (and one High Street lender) who have manual underwriting, where each case is taken on its merits rather than “computer says no!”, who are willing to consider lending. Some of the Offshore Banking sector is still OK with considering lending also but the rates are awful.
For Yacht Crew Mortgages an Experienced Broker is the Key
So, forget the rate tables on comparison sites, forget the majority of high street lenders, you are not going to get a Foreign Currency Mortgage at the super-low rates available to UK Public from these guys. Get in touch and engage with our Yacht Crew mortgage Advisers in Mallorca to ensure that your case is presented in the correct format, with all the correct supporting documents to the right lenders in order to achieve success in getting you the mortgage you need with a minimum of fuss.
One Last Thing
If you are earning in a foreign currency this is a great time to invest in UK property. Prices have flattened off since Brexit, the pound is on its knees so your foreign currency converts to more GBP and mortgage rates are at an all-time low. Why wait, get in touch now.
