Demand for foreign currency loans is growing and lenders need to be ready for it

Did you know that an estimated 4.92 million people born in the UK live overseas for work – equivalent to 7.5% of the current national population? Or that three out of four of workers would move for a definite job? You might also be interested to know that Australia, Spain, USA and New Zealand have attracted a combined 900,000 of the UK workforce since 2005. 

Evidentially, the number of people looking to jump ship and work abroad continues to rise, and unsurprisingly, many overseas workers have family back in the UK living in their property while they work away.

But is the pool of lenders comfortable in foreign currency lending shrinking while the consumer need is growing?

Take this scenario: Mr W works overseas and has done since 2015 with his wife residing in the family home based in Berkshire. His salary is paid in Hong Kong dollars; his living expenses are covered by his employer and he has a basic salary of $750,000. The couple are looking to help their son step onto the property ladder in London on a joint borrower – sole proprietor basis with the son on the deeds and Mr W’s income supporting the loan. Purchase price of the property is £700,000, mortgage on an interest only basis of £400,000 with a 60% LTV over a 10 year term. 

This is a complex case. Not only do we have to consider the currency in Hong Kong dollars with further assets and liabilities assessed in the UK and Hong Kong for affordability, but we also have Mr W looking for a joint mortgage with his son. 

In addition, there is the added cost of exchange rate fluctuations which need to be taken into account. This means that some lenders may trim a bit off the top of the total deposit sum and only exchange what’s left over (haircutting).  

So what did Mr W and his family need?

Simply: a mortgage lender who was willing to roll up its sleeves by considering the case on its individual merit. We did just that. 

We feel cases like these will become more common as the traditional working model changes and the desire to work abroad grows. As a result, borrowers will be paid in different currencies and it’s something lenders need to keep abreast with if they don’t want to miss out on a slice of the pie.

If you have clients who are looking to borrow with a foreign currency, we are here to help. 

So how does it work with us?

• borrowers need to be a British National;
• standard conversion rate applied to convert income to GBP using the Bank of England rates
• 100% of the converted income is used for affordability; property can be located throughout England and Wales
• all types of foreign currency loans are considered
• we will use 80% of the property overseas value as the repayment vehicle and we will consider regulated ex-pat buy-to-lets.