It’s fair to say that the world is becoming a smaller place and that nowadays few people live and work in the same location all their lives.
Not only is there a tendency to move within UK shores, but more people are deciding to sample a different lifestyle and move abroad. Unsurprisingly, people the world over feel the same way and with air travel having made any place on the planet perhaps just a day or two away, we are seeing high levels of inward and outward migration to the UK.
UK mortgage brokers have not always considered the natural ‘international element’ of the service they can offer, but it is certainly worth investigating. Traditionally, those brokers that have been involved in the offshore mortgage market are from the big London-based brokerages, although there is no real reason why other firms cannot be involved.
In the past, those intermediaries who have expatriate clients, for example, have often referred them on to ‘specialists’. However, there is really no need for this if the broker takes time to get to know the client, their circumstances and if they work with a lender who is able to help them through the offshore mortgage transaction process.
The typical client
Increasingly, intermediaries are looking at niche areas to increase their business volumes and income, and offshore mortgages should be one area under serious consideration by UK brokers. The first point of entry for brokers should be recognising the typical offshore mortgage clients, where they might come from and how they will want to be treated.
The typical clients that brokers will be dealing with tend to be financially sophisticated, high net worth and therefore particularly demanding in their financial advice needs. But, this shouldn’t put a broker off and, as stated, they need to look for the ‘international element’ to any client who may be suitable for offshore mortgages. In essence, we can break the typical offshore mortgage client into three types:
- Foreign nationals buying in the UK. They may already be resident in this country, but perhaps domiciled abroad for tax purposes.
- UK expatriates working abroad but buying in the UK.
- Clients looking to move offshore sometime in the near future, for example, those who may be retiring to Spain, Portugal, etc. These clients can use this time to sort out their tax planning arrangements in readiness for when they do move.
A different strategy
The international element to these purchases means that the clients buying in this way are often difficult to profile and require a different strategy. But again this shouldn’t put the broker off. Offshore mortgages tend to be for higher sums and therefore, while the broker may have to work a bit harder, they will be working for increased remuneration.
Having said this, many brokers will have been put off by the perception of complication and this, in most cases, is down to the tax element that comes with all offshore mortgages. It is vitally important that clients take tax advice prior to coming to the broker to ensure they maximise their benefits in this area. It is clearly in the best interests of a broker to ensure this is a smooth transaction as their clients will generally fit into the ‘cash-rich, time-poor category’ and will not want the added time inconvenience of a dragged-out process dogged by tax issues.
Of course, many of these types of clients will be expatriates moving around the world and often working for large multi-national companies who will provide full access to tax advice services anyway. These clients will want to ensure that their tax planning is fundamentally sound and will therefore not consider it a problem to have these issues sorted out prior to proceeding with the offshore mortgage.
Same basic principles
In many respects, a broker’s dealings with an ‘offshore client’ are just the same as any other. The same basic principles apply of fact-finding and servicing the client’s needs. But for the broker who is ‘raw’ to this niche area, it is vitally important they work with a lender who can, for want of a better phrase, hold their hand through the process.
Brokers in this market should remember that these types of clients are used to the best service levels and they will want that personal touch from all involved.
In this market it pays to use experienced offshore lenders not onshore lenders who, in providing this service, would be undertaking an exception to their lending norm. The main reason for using an offshore lender will be the fact that the loans will have to sit offshore anyway for the client’s tax purposes.
Dealing with offshore operations, to which this type of business is their bread and butter, means brokers can be confident that the solutions to any potential problems are already known. For example, how do you get income confirmation for someone who works abroad when their salary slips may not just be in a different format but in a completely different language? In these instances the experience and the skills of the lender involved will smooth the passage for both the mortgage intermediary and the client.
Keeping it old-school
While onshore lenders have forged ahead with their technology offerings and online application processes it is interesting that the same movement has not been made to the same extent by offshore lenders. As stated earlier, there is a lot to be said for the personal approach and this has meant that web access and portals are not an overriding feature of the offshore lending landscape.
To some, this may seem an odd state of affairs – after all, with such hurdles as time differences to overcome and the different distances over which relationships take place, one might have thought that these types of web-based systems would help speed the process up.
There are a number of reasons why, for instance, most offshore lenders continue to use faxes and telephone calls rather than more up-to-date technology. The first point to be made is that cutting-edge technology does not come cheap and lenders in this market must also be aware of the unique and flexible nature of every offshore mortgage transaction. Onshore lenders taking on large volumes of business with similar characteristics are obviously going to benefit from a system that is able to automate parts of that process. With offshore mortgages it is not so simple and many of the deals we write are ‘bespoke’. Plus there are not the same volumes of offshore mortgages to justify an expensive system.
This means that offshore mortgages are still very much paper-based deals – which might appeal to many – and the time difference hurdles can be overcome by the use of faxes.
The offshore mortgage market is still very much a niche sector but in these days where brokers are embracing the niche elements of the market and looking to diversify, then it is a market which can be increasingly lucrative. While there are no official statistics due to the various jurisdictions that many of the offshore lenders work, I would suspect that there is approximately £700 million to £1 billion of business currently being written offshore.
This is a growing market. We need only consider the levels of migration that the UK is seeing to recognise the future potential for increased offshore mortgage sales. This is a niche market but it is one that with the right lending partners will prove lucrative for any broker willing to put in the work and market themselves to their ‘international’ clients.
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