Expatriate mortgages are a popular way of financing home ownership, particularly for overseas students who often need to live in different places.
But expats are paying up to a third more than other UK residents on mortgages with high interest rates and other restrictions, according to a survey by financial services firm HSBC.
This has a knock-on effect on the UK’s economy, the survey found.
And it’s not just expats, the study found.
Many expats have a more conservative view of mortgage rates than their UK counterparts, HSBC said.
“It is not uncommon to see British expats pay more than twice the UK rate,” HSBC said in a statement.
“While there is evidence to suggest that the rate of return on equity for the British housing market has been rising for many years, the rate at which borrowers are paying down their mortgages has not been increasing in tandem with the rate that banks charge them.”HSBC’s research on mortgage rates is based on data from a number of sources including the Bank of England, mortgage lender Nationwide and online lender Prosper.
It found that expats were paying more than four times as much on mortgage loans with a rate of interest of 16.5 per cent, compared to 4.6 per cent for non-UK residents.
In fact, the majority of non-British expats would not have paid more than 12 per cent of their income on mortgages, the report found.HSBC said that in addition to higher interest rates, expats had been hit by restrictions on their right to purchase property and access to certain types of finance.
“Some of these restrictions are enforced by banks,” HSBC wrote.
“Others are imposed by authorities.
Still others are not enforced by anyone and can be circumvented by borrowers, in particular borrowers who live overseas.”
We do not know the full extent to which these restrictions impact expat households, but the impact is significant.”HSHS said that the data is based “on estimates and assumptions made in a single report” and that more work is needed to get a clearer picture.”
In particular, we are keen to understand how expats’ experiences differ across the UK, particularly across the most restrictive regions of England,” HSBC added.”
To our knowledge, this is the first such study of its kind to examine the extent to the difference between expats and non-resident residents.””
We also need to know whether these differences reflect differences in the rates of return of the UK economy or, more broadly, the way that the UK tax system is structured and the way expats in particular are taxed.”HSBHS’ research is based partly on HSBC’s annual UK mortgage survey which asked for opinions on a range of mortgage and mortgage-related topics, including rates of interest, home ownership and mortgage interest rates.
It was carried out in January, April and May.
It analysed responses from 1,700 households in the UK.