British expats face mortgage rejection

‘We are already facing difficulties with some customers’

Expats living in Europe are being rejected by lenders when they apply for mortgages in Britain.

The trade deal announced last month between the Government and the European Union did not include an agreement on financial services, making it tricky for British firms to operate in the bloc.

The confusion around the new rules has led some lenders to stop offering services to British expats in the EU entirely, even extending this ban to British nationals trying to return home and secure a mortgage in Britain.

Private Finance, a broker, said lenders had rejected mortgage applications for British expats regardless of the financial strength of the borrower.

One such borrower, working in the pharmaceutical sector with significant income and assets, was rejected by several lenders.

The applicant’s workplace had granted him the opportunity to move back to Britain on the same salary, but he was rejected by three lenders. Last year, each of the providers would have likely provided finance.

Newbury Building Society, one of these lenders, said the new rules had made it impossible for them to market any mortgage or savings products into the EU.

A spokesman added: “There is hope this will be only temporary and a deal for financial services will be completed by the end of March.”

A spokesman for Marsden Building Society, which also turned the applicant down, said: “The society took the decision to temporarily suspend applications from individuals residing in the European Economic Area. We hope an agreement will be reached for the financial services sector that will allow us to continue arranging new borrowing for British expats residing in EU countries.”

The rule changes mean British firms can honour existing contracts for expats but cannot offer more than what is known as “basic servicing”, according to Robert Sinclair, of trade body the Association of Mortgage Intermediaries. Any contract that was in place before Jan 1 can continue, but many lenders have encountered problems when amending existing contracts or agreeing new ones.

Mr Sinclair said it was complicated for lenders offering loans to clients staying in another country for more than 91 days in 180, and who have therefore had to apply for residency or nationality in the country they live in. “At that point, it’s down to the individual country’s interpretation of the rules,” he said.

Spain, for example, has said that any contract that existed before Jan 1 can exist in its current form until June 1, after which any firm that wants to deal with the borrowers will need to be registered in Spain.

Other countries, such as France, have not yet made any formal decisions. Mr Sinclair said: “We are already facing difficulties in terms of how we deal with certain customers, with some lenders not taking new applications.

“Most banks are now having to change their policies, which takes time. We’ll begin to see these policies evolve over the next few weeks and months.”

This is the latest in a series of complications for British expats as a result of the changes to the rules governing financial services.

Building society Nationwide revealed last month that thousands of British expats would be stripped of their bank accounts due to the change in rules.

In September, Lloyds Bank also revealed plans to close 13,000 accounts in Italy, Ireland, Portugal, Germany, Holland and Slovakia, while Barclays announced it would close an undisclosed number of accounts in Italy, Belgium, Slovakia and Estonia.

There are about 800,000 British citizens living in the EU, excluding Ireland, according to the Office for National Statistics. Britain and the EU are expected to publish clarification on the new rules for financial services firms in March.