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5 year fixed expat buy to let mortgages fall below 5%

Interest rates on five-year fixed-rate expat buy-to-let mortgages have now dropped to below 5%, according to brokers Offshoreonline.org. This follows a period when rates peaked at over 6%, following the UK Government’s mini-budget, which triggered a round of interest rate volatility.

“We are seeing expat mortgage lenders adopting a more sober, measured approach to interest rate setting and five-year fixed term rates at below 5%. Whilst the initial reaction of many of the smaller lenders was to withdraw products, once the market volatility hit quickly, we are confident these lenders will return in December or, at the latest, in January with competitive interest rates on offer,” said Guy Stephenson of Offshoreonline.org.

Offshore online believes that whilst longer-term fixed rates may drop again; overall, borrowers need to recalibrate their expectations around mortgage costs, with UK Base Rate likely to settle at around 3% or slightly more. “We are now seeing the return to a more traditional market; by that, we mean interest rates that were last seen before the financial crash in 2008/9. Even with higher mortgage rates, we believe that expats can still make a portfolio of properties work for them. Still, they will need to be careful and focus on better opportunities with good rental potential, so rising rents can help offset higher interest rate costs.”

At the same time, property portal Rightmove has reported that the average price of property coming to the market fell by 1.1% in November. Although the financial uncertainty facing buyers is still in line with normal seasonal drops recorded in November during the pre-pandemic years of 2015-2019.

For the expat, the currency is also a vital factor in the mix, with many paid in US dollars or currencies pegged to the US dollar, such as across the Middle and Far East. Since the start of 2022, the Sterling has fallen from around $1.36 to the pound to $1.20, a drop of just over 10%. For the expat property buyer based in the USA, Middle East or Far East, this can represent an immediate and significant reduction in the cost of buying a UK property.

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