21
Feb

Many initiatives were brought in to cope with the aftershock of the EU referendum result. One of them, however, is coming to a close, and it will add a small roadblock to the purchase of new mortgages. The Term Funding Scheme (TFS) is due to end on the 28th February this year.

It may affect other securities in place for expat buyers, such as options to finance at a fixed or tacked mortgage rate. Although the news is barely scraping the headlines, it could have a significant impact on overseas borrowers. We are going to examine what TFS is, why it’s being phased out, and what that means to you.

 

The end of post-EU referendum assistance

The UK has been in the grip of low interest rates for more than a decade – a direct result of the 2008 financial crisis, after which banks were keen to encourage borrowing rather than saving. This extended to mortgage rates, and brought good news to anyone looking to get on or climb up the property ladder.

Then the 2016 EU referendum happened. It caused many ripples in political and financial discourse, but one of the clear policy initiatives in response – designed to cushion the effect the shock result– was the TFS, enacted by the Bank of England.

Governor of the Bank of England, Mark Carney, reduced interest rates to 0.25% in August 2016. To ensure the rate cut was passed on to borrowers, the TFS was also introduced, giving lenders access to borrowing almost for free and offering low mortgage rates to borrowers.

And it worked. For the last 18 months, the TFS has kept mortgage rates at a historic low. But times have changed; as the Bank of England restores the base rate of 0.5% in light of economic recovery, the 28th February 2018 marks the final day of the scheme. So what does this mean for borrowers?

Why now is the time to secure a deal

The imminent demise of the TFS means that banks will begin to focus on saving accounts, instead of people willing to buy up property. It affects tracker mortgages, which usually follow the course of the Bank of England’s lending policy, and fixed rate mortgages drawn up after the 28th February.

Overseas investors seeking to mortgage or remortgage their property or portfolio stand to lose out as a result. They are under more scrutiny than UK-based applicants; therefore, they should be taking advantage of these exceptional circumstances while they last.

There is more uncertainty to face too – it is far from clear whether the abolition of the Stamp Duty Charge for first-time buyers (announced in the 2017 Autumn Budget) will be a temporary initiative for First Time Buyers. Measures taken to help buyers – first-time or otherwise – could be rescinded when a new authority comes to power.

By assessing finance options now, expats and foreign nationals can lock in historically low mortgage rates while they last. Liquid Expat Mortgages are here to assist the process. We help clients from around the world find the best schemes to own a home or rent property in the UK, whatever their economic status. Contact us for advice before you miss out on the assistance at play in the current climate.

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