Remortaging an overseas home to buy in UK is ‘madness’

10September2008

BritsthinkingofrefinancingtheirpropertiesabroadtofinanceahomepurchaseintheUKshouldthinkagain,accordingtoIainMartinofCityWire.

ManypropertyinvestorscouldrightlybetemptedtobuypropertyintheUKatthemomentduetothefactthatit’sverymuchabuyer’smarket,withpricesfalling.

However,thefactthatbanksarebeingfarmorestringentwithmortgagelendingmeansthatapurchaserhasnowgottoraiseagreaterdeposit.Thisleavesthosepeoplewhoownpropertiesoverseas,withtheverytemptingoptionofremortgagingabroad,asrecentlyproposedbyAssetz.Butinresponse,Martinsaidthatthisalternativeisnotadvisable.

Hecomments:“Remortgagingit[ahomeoverseas]tothehilttobuyintheUKismadness.

“CatchingafallingknifeisapopularCityphraseforwheninvestorsgethurtbybuyingsharesstillonthewaydown.ItisanequallyaptexpressionforincreasingyourexposuretothefallingUKandEuropeanpropertymarkets.”

MartinpointstothefactthattheUKpoundhasweakenedsomewhatthisyearagainstforeigncurrencies,includinga16%fallagainsttheEuro,meaningthattheideaofenlargingthesizeofaEuro-mortgagenow“couldnotbelessattractive.“

Headded:“inaperfectworldrentpaidinEurosfromtheholidayhomewouldcoverthemortgageandtheexchangeratewoulddeliveraevenbiggerdeposit.Butinaperfectworldhousepriceswouldstillbeclimbing5%in2008inlinewithAssetz’sprediction.”