Lenders halt lending to expats in the EU due to Brexit

28 January 2021 | General

Some mortgage lenders are refusing to lend to British expats living in the EU following the UK’s exit from the European Union.

Lenders adopting this policy include Newbury and Marsden building societies – though they both indicated that these restrictions may only be temporary, depending on ongoing UK-EU financial services negotiations.

A spokeswoman for Newbury Building Society said: “The change of policy regarding Brexit deal negotiated by the government excludes financial services.

“This means without passporting rights, Newbury Building Society is unable to market any mortgage or savings products into the EU.

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

Passporting enables a firm registered in the European Economic Area (EEA) to do business in any other EEA state without the need for further authorization from each country – but the UK has now left the EEA.

There have already been UK bank closures for EU residents holding accounts with the likes of HSBC, RBS/NatWest, Lloyds TSB, Halifax, Bank of Scotland, Barclays and Santander.

Expats, whether they’re looking for a residential or buy-to-let mortgage, typically need to make payments using a UK bank account.

Marsden Building Society has also restricted lending to individuals residing in the EU, along with those in Iceland, Liechtenstein and Norway, all countries in the European Economic Area.

The society said it was monitoring the steps being taken by the UK government and its intention to put arrangements in place based on the system of equivalence, whereby UK banks and other financial institutions can trade, on a regulatory basis, as if they were still in the EU.

Donna Barclay, senior lending manager at Marsden Building Society, said “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/EEA countries.

“We await further news of an agreement and how this will impact us moving forward and will keep our customers and brokers informed of any changes.”

There are 1.3 million people born in the UK who live in EU countries according to 2019 UN data. Spain has the most (302,000), followed by Ireland (293,000), France (177,000), Germany (99,000) and Italy (66,000).

Chris Sykes, mortgage consultant at Private Finance, is a broker that flagged the issue to PropertyWire.

He noted that Marsden was an affordable lender for expats, making its withdrawal from this market a particularly big blow.

Market Harborough Building Society was also named as a lender that may have taken a step back from this market.

PropertyWire reached out to the building society but is yet to receive a response.

Sykes said: “I hope this is a pause rather than a permanent change – lenders would be fools to exclude all lending to people in the EU.

“There are far fewer options available to expats now if they’re in the EU, with some lenders like TSB no longer allowing those in the EU to switch products on buy-to-lets at the end of the product term.

“But worse there are fewer options when someone is trying to remortgage or buy a new buy-to-let property from in the EU.”

He had clients who are British expats living in the EU turned away for a standard residential mortgage in the UK by lenders who were previously very active in this space of the market.

One client  worked in the pharmaceutical sector with significant income and assets, both liquid and property. This highlights how borrowers with an extremely strong profile are being turned down.

Sykes added: “This does not appear to be a temporary change, as one lender explained to us, “Yes this is due to Brexit, as far as we are aware this is a permanent change in policy”.

“Luckily we do still have other lenders who will consider the case.”

This post has originally been featured in Property Wire.