Foreign nationals facing a gap on homeownership
Some mortgage lenders are ruling out African people living and working in the UK, according to a new specialist lender that aims to meet their needs.
These potential borrowers – and possibly other foreign nationals - are being let down in their attempts to secure a mortgage, suggests Alan Davison (pictured left), chief commercial officer of Afin Bank.
The bank has been launched in response to the challenges experienced by customers who do not meet mainstream criteria, Davison said.
“The inspiration for Afin Bank came from the real experiences of people living in the UK, especially those from West Africa, struggling to get a mortgage because of their nationality or visa status, or lack of credit history within the UK,” he told Mortgage Introducer.
“Certain lenders rule out clients from African countries altogether. There are more than 1.5 million African nationals in the UK, and if you include other groups, there are around eight million foreign nationals in the UK, according to government data, so this is a big group of potential borrowers that might struggle to get a mortgage from a mainstream lender.”
Such borrowers are usually only considered by mainstream providers if their credit appetite allows, explained Davison. They will often be required to have at least three years’ residency or rights to reside in the UK for minimum residency periods of 12 to 24 months.
How much demand is there from non-UK residents for mortgages?
There was a 54% increase in mortgage searches for non-UK resident criteria in Q4 2023 compared to the year before, according to data from mortgage tech company Twenty7Tec. Afin Bank believes this demonstrates a growing demand and it plans to bridge this gap by providing residential and buy-to-let mortgages, along with savings accounts.
“Our pragmatic approach will support these clients who positively contribute to the UK, after just six months residency, and those who are yet to establish a UK credit footprint,” Davison said. “Our underwriting will be tuned to overcome those barriers.”
“Ultimately, for a broker, an African client is no different to any other client, especially those with non-standard circumstances,” Davison noted.
As a new specialist lender, Afin Bank believes that as it grows it is likely to appeal to borrowers from other under-served diaspora communities, and that its products will also suit a broad spectrum of non-standard customers, such as self-employed people, who can struggle to get a mortgage through mainstream providers.
“While the number of self-employed people declined in the immediate post-COVID period, it has risen in recent years to around 4.3 million,” said Davison. “Because they usually don’t earn a traditional monthly salary, it can be difficult for self-employed borrowers to meet income criteria of mainstream banks, so I expect there to be more demand on lenders with specialist underwriting teams.
“The specialist mortgage market is likely to grow to support borrowers with complex incomes and the self-employed, as well as first-time buyers looking to get on the property ladder but needing support around higher LTVs and loan to income ratios.”
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The expectation of further rate reductions as inflation stabilises is bringing a level of optimism to the property market, he said, as shown by an increase in house purchase transactions of around 65,000 (worth £15.4bn) in August this year, the highest since August 2022.
Afin Bank is therefore establishing its business at a time of change for the mortgage industry. It is backed by WAICA Re, a major African reinsurer that has committed over £60m to the venture, and it has recently secured its initial banking licence (Authorisation with Restrictions – AWR).
“Getting a banking licence is understandably complex and difficult, but even after fledgling lenders are authorised, they can struggle to scale up because they need capital to lend and invest in their operations,” Davison observed.
“We will take the time to finetune our products and service, build relationships with brokers and networks in the African community, so that when we fully launch, we can be certain that we are offering the right products and are able to support this under-served market.”
Davison, who has been working in financial services for around 25 years, came to Afin Bank from Together, where he was distribution director for personal finance. He has now been joined by James Briggs (pictured right), who was previously head of intermediary sales at Together and takes up a role as intermediary sales director.
