Do New Buy-To-Let Rules Affect UK Expat Buyers?

Rules on UK lending introduced by the UK’s Prudential Regulation Authority limit the amount expat buy-to-let property investors and landlords can borrow on new mortgages.

The new rules are designed to slow the demand for UK buy-to-let investment by demanding buyers raise larger deposits. Lenders will have to test affordability using notional interest rates of 5.5%, ensuring rental coverage of up to 145% of this figure. This could mean a loan of £200,000 needs support by a rental income of up to £1,328, but in practice the true figure is likely to be between £1,150 and £1,328, as there is some latitude for lenders.

In the run up to the start of 2017, both expat mortgage brokers and banks reported a surge of activity, as buyers sought to beat the deadline for these rules. Large numbers of expat clients were pushing to register their mortgage application before the deadline of 31 December to avoid the new rules, according to offshoreonline.org.

But the impact on expat buyers might not be as harsh as on UK resident buy-to-let investors, who have until now enjoyed mortgage funding rates of at least 80% of the purchase price.

Offshoreonline say that many lenders insisted on a 35% contribution. At these sorts of levels, the vast majority of expat buy-to-let projects will pass the new, tougher lending test and still make sense for the buyer.