Foreign national mortgage – why is it so hard for overseas buyers to invest in the UK & what is the solution?

Overseas investors do not appear to share our press’ pessimism for the UK property market. Demand for UK property from foreign nationals is still there, even as some domestic buyers shy away. But the market for foreign national mortgage products has become tricky to navigate. To help you better understand your options, this blog will break down some of the basics.

Current mortgage criteria for foreign nationals

Criteria searches have been dominated by overseas queries in recent months, according to Twenty7tec. Its latest data release revealed that the most common searches for January 2023 were:

• Can applications from Non-EU, EEA Non-UK Foreign Nationals be accepted? And under what conditions?
• Can applicants on a VISA be considered? What are the acceptable requirements?
• Can applicants with fewer than 3 years UK residency be considered?

This shouldn’t really come as a surprise. Our recent economic problems have actually created opportunities for overseas buyers. Foreign national property investors rushed in to buy UK property at a discount when the pound plummeted in Autumn 2022.

London’s prime options were snapped up. But a clear preference in method has emerged. Around half of the homes sold in prime central London locations in January were bought without a mortgage. This was up from 42% in January 2022, and 38% in 2021.

Many may be opting to buy in cash due to the obvious cost-saving benefits. But, it may also be the case that some foreign nationals are struggling to gain access via mortgages. Indeed, mortgage criteria has tightened for UK citizens in recent months, let alone those coming from abroad.

Source: Twenty7tec, The Telegraph, Reuters

How do lenders assess foreign national mortgage applicants?

Foreign national buyers can get a UK mortgage without needing a UK passport. If you fall into this bracket, you need to apply for what’s called a foreign national mortgage. A product specifically designed for foreign borrowers.

They generally operate in the same way UK mortgages do. Though, they tend to be deal with more complex circumstances. Mainstream lenders can view overseas borrowers as a higher risk. So their criteria may be more stringent. Also, they may be reluctant to lend to riskier borrowers when inflation is high, interest rates are rising, and the economy is struggling.

Generally, foreign national mortgage lending criteria will vary between lenders. But, borrowers will typically be placed into one of three boxes, according to Online Mortgage Advisor.

Non-UK residents, who have either permanent residency or indefinite leave to remain, will likely face a relatively easy process. Lenders may treat these borrowers in the same way they treat British nationals.

If you primarily live and work overseas, you can still get a foreign national mortgage. You should expect more rigid checks though. Meanwhile, prior to Brexit, EU citizens would likely have faced a similar process to their British counterparts. However, they’re now likely to face more complex assessments.

What about overseas income, and who are the lenders willing to work with foreign nationals?

Those with foreign income may also face difficulties. Lenders will typically want to see these funds converted into pounds for the mortgage application. This brings with it exchange rate complications. As it stands, any money earned outside of England, Wales, Scotland and Northern Ireland counts as foreign earned income.

There are few UK lenders who will offer mortgages to foreign nationals. The ones that do may have a preference for borrowers who have been a UK resident for at least 2 years, have a permanent job, a UK bank account, and a strong credit history.

Currently, there are only a few high street names out there likely to offer mortgages to non-UK residents. This includes HSBC, Barclays, NatWest and Skipton International, according to Better.

Property investors will want to move quickly where they find these deals. Hundreds of mortgages were pulled from the market almost overnight following September’s mini budget.

The numbers have since recovered. But confidence in the market hasn’t. Mortgage approvals fell to 35,600 in December. The lowest number seen since the early months of the pandemic.

Source: Online Mortgage Advisor, Better, The Guardian, Sky News

Do I need a visa and do I need to be in the country to get a mortgage?

Mainstream lenders will have varying criterion when it comes to applications from those on a Visa. Some may only offer foreign national mortgage deals to borrowers who have a permanent right to stay. While others may be more accepting of those in the UK on a visa.

For those that do accept applicants with Visas, most will consider tier 1, 2 and 5 UK Visas, spousal and ancestry Visas, or student and work Visas, according to Revolution Brokers.

• Tier 1 Visas are given to high-net-worth individuals, investors, entrepreneurs, and the like.
• Tier 2 Visas are given to non-European Economic Area migrants seeking employment in the UK who will have sponsorship from domestic companies.
• Tier 5 Visas are more complex, but are generally given to specialist workers in the UK on a relatively short-term basis.

While it’s possible for foreign nationals to buy property in the UK without a Visa, it’ll likely be difficult to do so without a mortgage. But, as it stands, it’s already hard enough for UK property investors to afford mortgage repayments. Foreign nationals are likely to face the same affordability issues, with additional costs and scrutiny.

What’s more, suppliers in the market are struggling to support foreign nationals. Even with rising demand. A recent survey of brokers revealed they struggled to find mortgages for clients with foreign income in 2022.

Source: Revolution Brokers, Chancery Solicitors , RWinvest, Moneyfacts, United Trust Bank

The solution to foreign national mortgage issues

However, while it may be tricky for overseas buyers to find a suitable foreign national mortgage for their UK investment plans, that doesn’t mean they’re devoid of options.

Specialist finance can offer reprieve to property investors who may be shut off from the high street. We have Foreign Nationals/Overseas Bridging Finance available that has been specifically designed to support foreign investors.

We can provide funding for a range of property investment plans. We may be able to support you regardless of whether you’re investing in a rental opportunity, converting a commercial space, or locking in an auction purchase.

Also, you can approach us through a range of circumstances. No matter how complex your background, we’ll be able to adapt. We can work with foreign nationals investing as individuals or through an offshore company. Even if you don’t live in the UK or own any assets in the UK.

So long as you’re investing in property in England or Wales, and are not coming to us via a sanctioned country, we’ll be able to work with you. If you want to break into the British market, we’re here to help.