How easy is it to secure finance in foreign climes? Clare Nessling, operations director at Conti, explains
According to recent media reports, the eurozone debt crisis is scuppering UK buyers’ hopes of securing an overseas mortgage. But bargain prices and low interest rates mean that buying property abroad may never have been more affordable. So just how easy or difficult is it to finance the purchase of a foreign home?
The answer may be more positive than you expect, but just how easy it is does depend on where your clients want to buy.
Based on the mortgage enquiries we’ve received in 2011, France remains the top location for buying abroad, followed by Spain and then Turkey. Portugal and Italy are still popular too.
Despite the global economic crisis, the French mortgage market has remained pretty calm, primarily due to its financial system having been more cautious in the past. It offers the most finance options and best available rates in Europe for UK buyers at the moment, and although some lenders tightened their lending criteria a few months ago, they’re starting to improve their deals again. As France is in a relatively secure situation, its loan to value ratios are still high and it’s quite normal to be able to borrow between 70-90% of the value of a property, and in some cases, it’s even possible to get a loan without putting down a deposit. Rates currently start from just over 2%.
In Spain, mortgage availability is surprisingly good, despite the negative headlines about its property market. Mortgage providers still have a healthy appetite for lending, with maximum loan to values still around 65-70%. Generally speaking, smaller deposits are possible in areas where house prices are more resilient, such as the Balearics, the Canary Islands, Madrid and Barcelona. Rates currently start from around 3%, with repayment deals prevailing. The Spanish banks now own a lot of repossessed properties, so are offering some attractive rates in order to get these off their hands.
In Turkey, it’s possible to borrow up to 80%, and considering that the country didn’t even offer mortgages until 2007, availability is generally very good. Lenders tend to prefer shorter terms though, with 10-15 years being quite typical, and rates start from around 4 or 5% at the moment. Turkey offers some great property prices, and tourism has risen dramatically over the last few years, making rental yields very lucrative. No wonder it’s one of the biggest hotspots for UK buyers.
In Portugal, you can still generally borrow up to 70%, but lenders have reduced their mortgage portfolios, fixed rate deals have become rare and margins have increased. The country may be struggling with debt and stuck with the label of one of Europe’s so-called PIGS, but it has managed to escape the type of property crash experienced by Spain, due to its tighter lending conditions and stricter planning laws which have helped to prevent over-development. So although things are difficult here at the moment, I expect mortgage availability to start improving again soon.
While there have been concerns that the eurozone debt crisis is spreading to Italy, mortgage rates have remained largely unchanged and are still quite low, starting from 3.4%. And although its range of products had shrunk significantly in size over the last few years, it’s growing again. A new international bank recently joined the market to sharpen the competition with the existing players, and it’s now possible to borrow up to 80% of the value of a property there.
If you’ve not yet considered the overseas mortgage market as a new source of income, it’s a good time to do so. There are plenty of British buyers taking advantage of the property bargains available abroad, and they’re more willing to explore overseas opportunities in their search for better potential returns on investment than they’re achieving in the UK.
