What would a Brexit mean expat mortgage borrowers?

We have many clients who live abroad but own houses in the UK or want to invest in the British property market.

Many are Brits abroad [perhaps working in financial centres such as Hong Kong, Singapore or New York. Others may be retired living in France, Spain or Italy in the continent.

For them the UK’s decision to push ahead with an in/out referendum on Britain’s membership of the EU matters.

It matters how it will impact on their biggest monthly outlay of a mortgage and most probably their biggest asset in the UK.

So let’s look at what a so-called Brexit could mean for mortgage borrowers?

In reality an EU exit would take place over a number of years with many treaties renegotiated and exited but there are some key uncertainties to consider.

Firstly, free movement of people, goods and services across Europe would almost certainly end in its current form.

This would make life more difficult for someone living in Spain and financing a UK mortgage. Any Briton loving in Spain would need to apply for a visa to stay there and that could have an impact on mortgage borrowing.

Visa negotiations with another country could create more job insecurity and ultimately affect how much can be borrowed from a lender.

It could also have an impact on how much money can be claimed relating to pension payments and winter fuel allowances for example.

The Government has already introduced a so-called “temperature test” so that anyone living in a country with a higher average temperature than the UK can no longer claim winter fuel allowance.

Leaving the EU would create less rights to benefits in other EU countries so welfare payments could be restricted for those claiming in other countries.

This could create reductions or uncertainty around income and have an impact on mortgage affordability calculations.

Most importantly could be the impact on the currency markets and how the UK economy reacts to an EU exit in the long-term.

HSBC has cited the possibility of an EU exit as a reason it could relocate its headquarters from the UK to elsewhere – most likely its home of Hong Kong. Deutsche Bank have also suggested it would relocate.

If banks leave the UK then it would reduce competition in the UK mortgage market and leave borrowers with less choice.

Ultimately less competition and choice drives up prices and rate leaving borrowers with higher monthly mortgage bills.

It would also be crucial to see how Sterling interacts with the euro after an exit and how that impact on mortgage payments.

It would create an era of uncertainty where Sterling would likely weaken against the euro benefitting anyone getting paid in euros and paying a mortgage in Sterling.

But anyone who received rental payments in Sterling would be worse off if they spent the money in Euros.

Leaving the EU would be complex and high uncertain but it would have an impact on mortgage holders and it is time to start looking at options to guard against uncertainty by seeking advice.