A single lender repricing in one September week upended rates in a thin market, FORTO says
British expats who put down a 40% deposit on a UK rental property are now paying more for their mortgage than those who put down 20%, according to new research from mortgage broker FORTO Finance. Advisers with cross-border clients may want to flag the reversal before a deposit is committed.
FORTO’s first Expat Mortgage Demand & Origination Monitor found that on 28 September the buy-to-let rate at 60% loan-to-value (LTV) stood at 5.89%, against 5.70% at 80% LTV. The 70% LTV rate was higher still, at 5.99%.
The flip happened in a single week. Between 14 and 21 September, the 60% LTV rate rose by 82 basis points and the 70% rate by 80, while the 80% rate rose by just one. For most of the quarter, 60% LTV had been the cheapest band, dipping as low as 4.96% in late August.
FORTO linked the jump to swap rates, which lenders use to price fixed deals, climbing above 4.70%. It also cited major lenders repricing twice in September amid inflation fears tied to the Middle East conflict involving the US and Iran. The two-year swap rate was still 4.75% on 14 October. Moneyfacts reported the average two-year fixed rate hit 5.98% on 5 October, its highest since December 2023.
The Bank of England held Bank Rate at 3.75% on 17 September, with three of nine Monetary Policy Committee members voting for a rise to 4%, as MTS Insights summarised. Its next decision is due on 5 November.
A thin market where one lender can move a band
Anthony Curtis, director at FORTO Finance, said: “Expat pricing is set by a small number of active lenders, so a single repricing can move a whole band. That is what happened in the third week of September. Anyone assuming that a bigger deposit guarantees a better rate should check with a broker before committing. This is actually a weird quirk of a very specialised market; the large fees involved with some of these products mean the low headline rates don’t tell the whole story.”
FORTO identified 46 lenders offering mortgages to expats. Esmé Rook, operations manager and paraplanner at the firm, said: “The expat market is wider than it is deep. While there are 46 lenders in the market, there are fewer than 20 that are actively developing their proposition, and many of them are mutuals using manual underwriting. A good broker, specialising in this corner of the mortgage market, will know which lenders are genuinely engaged in any given month.”
New products, shifting rules
FORTO said new products clustered around limited companies, houses in multiple occupation (HMOs) and holiday lets. In August, Skipton International launched limited company buy-to-let lending for non-UK resident directors. It carries a 65% LTV cap, a £200,000 minimum loan and a £4,999 application fee. Saffron Building Society added expat HMO products in September, including for large HMOs. FORTO said another building society raised the maximum LTV on a three-year fixed expat residential mortgage from 80% to 90%.
Country eligibility also shifted. In September, Marsden Building Society scrapped its country exclusions list in favour of live Financial Action Task Force (FATF) data. It will not lend to applicants living in, or with financial links to, countries on the FATF black and grey lists. FORTO said residents of the EU and EEA remain outside Marsden’s criteria, as do Australian residents.
Skipton International has reportedly not accepted new mortgage applications from EU residents since 31 March, citing the EU’s revised Capital Requirements Directive. Its new limited company product does accept EU-resident directors, however.
Rook said: “Where an expat can borrow is increasingly decided by regulators rather than by lenders’ credit committees. Linking criteria to the FATF lists makes the rules transparent, but it also means they can change overnight.
“Expats need to ensure their broker is checking country criteria on the day they submit an application, not the day they take the enquiry.”
FORTO will publish the index quarterly. Its next edition will also report a count of dedicated expat products.
