We are very concerned to learn that Nationwide Building Society is no longer offering new mortgage loans to individuals with income paid in foreign currency.
The shift came into force on April 8 and Nationwide blames new EU mortgage rules that aim to protect mortgage borrowers against exchange rate fluctuations.
The shift came into force on April 8 and Nationwide blames new EU mortgage rules that aim to protect mortgage borrowers against exchange rate fluctuations.
We have many British expat clients living abroad and this is a big blow to their aspirations to own property in the UK.
Nationwide is one of the biggest lenders in the UK and it remains to be seen whether others follow ahead of EU rules coming into force in March next year.
Nationwide says foreign currency income may still be considered for existing customers moving home but only where no new lending is required.
The building society said any foreign currency income must be converted to Sterling by the customer before use.
This is difficult for Brits living abroad who want to buy a home in the UK to take advantage of the booming UK property sector.
It will also restrict access to the London property market for wealthy foreign nationals who invest in the capital, although many will use cash purchases.
Am I affected?
Borrowers living or working abroad need to consider if they are affected. The key factor is whether the mortgage and the income/asset from which the mortgage is to repaid are in the same currency.
In theory an expat living in Spain could take out a Sterling mortgage and repay it with his Sterling income. This would not be a foreign currency loan.
If you are an expat living in New York and paid in dollars but looking to take out a Sterling mortgage with Nationwide then you will be rebuffed no matter how much you earn.
Similarly, and more pertinently for many, a man living in Northern Ireland, with a Sterling mortgage, but with a job over the Irish border and paid in Euros would be a foreign currency loan.
The same applies to individuals who work on the continent and are paid in Euros but return to their Sterling mortgage loan in the UK.
The rules will only apply to residential mortgages and not currently buy to let deals in the UK which will be a relief to expats looking to become UK landlords.
The EU rules were initially intended to affect buy to let mortgages as well but in they were exempted among the political horse trading in Brussels. This means it is possible they may be included at some [point in the future.
What to do?
Your first act should be to take advice on your position. Even if you have an existing mortgage you will not be able to loan more money through remortgage if you are paid in one currency and mortgaged in Sterling. It is restrictive even for existing borrowers.
The EU rules mean other banks are likely to follow suit so it is not just Nationwide customers who will be affected.
Borrowers may consider shifting all or part of their income into Sterling if possible to match the mortgage payments.
Alternatively, if you have significant assets then you may be a viable private banking customer which have more relaxed rules around foreign currency lending.
Either way, Nationwide has acted now and the rules are changing so if you have foreign currency income and a Sterling mortgage or you would like on in the future then learn about your options.
