Overseas mortgages and the UK Financial Services Authority

The Overseas mortgage industry is currently unregulated and standards vary considerably from region to region and from broker to broker. The UK Financial Services Authority reports that this situation is unsatisfactory and wants to break down the barriers of the cross border mortgage market.

Unregulated overseas mortgages are leaving the FSA twitching about consumer protection in an increasing sector the overseas property industry

Anna Brewer, Director USHE Overseas Mortgage Specialists ‘In general, the overseas mortgage market is currently years behind the UK mortgage market. The UK house purchaser has thousands of products at their disposal, from 90% Loan to Value (LTV) to Self Certified and of course Buy to Let, and within this scope Repayment, Flexible or Interest only repayment at Variable, Fixed, Capped, Tracker rates etc., the list goes on. The UK market is one of the largest house owning nations in the world and much higher than most European countries. Overseas Mortgage lenders in many countries are not used to a property owning nation and the mortgage market is currently very cautious about the implications as it enters the world of property lending.’

Speaking at the annual European Mortgage Market Federation conference, John Tiner, chief executive of the FSA, voiced his concerns about the sector, claiming that, despite the overseas property investment bull run, its future would not be decided by consumers shopping around, but by lenders entering new markets.

Mr Tiner believes a number of points need to be addressed including the development of trusted common valuation standards that can be widely used and understood by valuers and lenders, increasing access to land registry information systems, and increasing non-discriminatory cross-border access to consumer credit data. He also said that EU mortgage market should consider a principles-based approach.

He said: “As I see it, a key characteristic of a fully functioning market is that it delivers a wide range of products for consumers to choose from – what the London Economics study calls ‘market completeness’. As the study of costs and benefits makes clear, increasing product diversity in Member States is key to achieving real benefits from a more integrated mortgage market.”

Due to this fact the overseas mortgage market is far more cautious than the UK. Most lenders in all but a few countries will only lend 70% LTV and only on a repayment basis. Affordability is the criteria used when assessing a person and the lender takes into account everything including the UK mortgage payments. 

For the overseas mortgage market to change and offer more products and introduce a higher volume of lenders, then certain cross border barriers will need to be removed.

Can you imagine one of the big three UK banks allowing Mr X walking into his high street branch in the UK and taking out a mortgage in any other European country. This we feel is a distance away.  The UK lender would need to be able to secure a charge on the title at the Local Land Registry, and visa versa, if a Bulgarian Mortgage Lender were required to mortgage a UK property.  EULIS, a portal does provide access to certain participating Member States with electronic registers. However, the national arrangements differ considerably.   

How could the bank in the UK get the property valued when standards of valuation may not come up to the banks approval? As there is no universal valuation system around the world this proposal seems unlikely, unless some standard principals can be introduced.

Also for either bank to assess an applicant then use of credit information would need to be accessed. There are however important considerations about the form of data held and consumer privacy that would need to be respected.

However all of this would allow a more transparent overseas mortgage system with greater products and suppliers, and a degree of comparison for the customer.

USHE Overseas Mortgage Company is working in the overseas property market dealing with banks in countries as diverse as China to Canada. USHE Overseas mortgage company director Anna Brewer’ We would agree that a system allowing the broker to offer products that are comparable, as with the UK mortgage system, would be a great benefit for all concerned. UK overseas buyers should consider using a mortgage broker that applies the principles of FSA regulation when dealing with overseas mortgages.  

Regulating an overseas mortgage industry which is as diverse as its nations seems to be an ideal that appears to be a long way off.

 

Information on overseas mortgages