For Expat Property Buyers - Inertia Rules
Expatriates are generally well educated and better paid than their UK counterparts. Why then do they allow financial services provider to sell them high charging sub-standard financial products?
It doesn't require a great deal of financial acumen to realise that a mortgage interest rate of Bank Base plus a margin of 1.5% will cost considerably more than a loan costing Bank Base plus 0.25%. On an average expatriate mortgage of BP 250,000, the interest difference charges over a year comes to BP 3,120 - put another way, there is a 25% difference in cost. Are expats so well paid they don't need to make these savings? A combination of inertia and ignorance might have been an excuse in the past but with its high expatriate penetration, the internet should ensure that no expat falls or stays a victim of banks who go to great lengths to massage their overseas customer egos but show little interest in saving them money.
International Mortgage Plans (IMP) estimate that over 70% of borrowers pay more than they need for their housing finance. It is evident that apart from inertia and ignorance there is a fear of "the hassle" involved in refinancing and perhaps the existing providers induced fault that the exercise of switching lenders will be costly. That is a fallacy and IMP access a steadily growing number of mortgage schemes where valuation and/or legal costs are waived or discounted, as are lenders arrangement fees. None of IMP's lenders differentiate between expat and UK domestic borrowers even though the expat will normally be letting commercially with full tax efficiency on their interest payments.
Many expatriates have seen the value of their UK properties soar. Remortgaging can take advantage of this by releasing equity to fund overseas property purchase, retirement or education planning, care for sick or aged family or consumer products of any type. In all cases, funds can be available at rates as low as 0.25% over Bank Base.
Expats wishing to compare their own loan packages with what is currently available to them should click on IMP's website at www.international-mortage-plans.com which gives an overview of the current market place, lenders comparable terms and incorporate a cost and commitment free 24 hour acceptance in principle guarantee.
UK Property Prices
Who knows? Nationwide reported that prices rose by 0.5% in February 2005. The Halifax reported that they fell by 0.5%. Certainly the doom mongers forecasting an imminent property collapse last Autumn seem to have lost confidence in their damaging, negative and seemingly, unsupported projections. Website, www.propertyfinder.com confirm that 52% of house hunters now expect prices to rise this year against 30% in December 2004. All this applies to UK prices in general but regional and local values will always show wide variations from the "average".
Home Truths of the Web
It's no longer necessary to rely on the unreliable gossip of neighbours or the self-serving estimates of property agents to find out what individual property is sold for. It's all recorded on the web - another boon to expat would-be buyers. www.nethouseprices.com allows us to establish exactly what price property has achieved since April 2000, www.myhouseprice.com and www.hometrack.co.uk provide a similar service. If you want the official land Registry line, try www.landregisteronline.gov.uk. Whilst it does not have a facility for a general search of all homes sold recently in an area, it gives access to the register and title plan for more than 80% of homes in England and Wales. The expat UK property buyer is newly empowered.
Property as a Pension Fund Investment
From April 2006, UK investors will be able to buy residential property, at home and overseas and place then in the tax efficient wraparound of a UK self-Invested Personal Pension (SIPP). Such property will be free of tax on rental income and all capital gains and UK pension funds will be able to borrow up to 50% of the pension funds value to make further investments. There is no doubt that the public, in general, would rather invest in something tangible and over which they have control. They are fed up being overcharged for investment advice, which at best, is inadequate, and, at worst, nothing short of negligent.
There is no doubt that this new pension ruling will give a huge impetus to the UK property market. Leading industry experts expect savers will use their pension funds to purchase Buy-to-Let properties, worth between £7 and £11 billion, or between 10% to 15% of the current market.
We now that many expatriates have substantial UK pension assets and they will also be able to benefit from these new investment opportunities. It will be essential that expatriate take advice via a UK Financial Services Authority regulated independent financial adviser for this type of product.
Buy-to-Let Investors still smiling
The prospect of being able to tax shelter their buy to let investments in pension arrangements has buy to let investors positively salivating! Quite why Gordon Brown should choose to initiate the biggest tax give away for high earners ever seen is beyond comprehension. The proposals are astonishing coming from a Labour government. Returns on buy to let investments could be almost doubled if the new planning is used correctly and to its full tax efficiency.
Despite the mixed forecast for property values in 2005, buy to let landlords have remained confident. Paragon Mortgages, a leader in the field, confirm that the average property investor, who owned ten properties in 2000, now owns thirteen and is still looking to increase their portfolio. As home ownership has become more of a stretch for many prospective first-time buyers, many of them have stayed in rented accommodation longer. Very few buy-to-let landlords surveyed said they would be selling their properties in 2005 if prices should fall. Likewise, the Association of Residential Letting Agents (ARLA), have carried out surveys confirming similar results, that show that sensible buy-to-let investors are not short-termist in outlook and do not trade on emotive market signals. Some 89% of ARLA's 800 investors surveyed, said they would not sell, even if house prices fell but would be prepared to stand their ground and rely on a return to more favourable market conditions. An exceptional impetus can be expected by the changes in pension plans already noted.