Warning, if your hoping to buy a house this may affect you

Rovers_Andy

Rovers_Andy

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Andy
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That is the cost of not being in the Euro zone.

as usual the british government will interpret the rules to our disadvantage, and the rest of Europe will just laugh at our stupidity.

Not many people earn in one courancy and take out loans in another except to make a financial gain.
 
Terrywoodenpic said:
Not many people earn in one courancy and take out loans in another except to make a financial gain.
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I am in merchant navy. I joined a company last June and contract was GBP, still on the same ship but now company moved contracts to USD. So through no fault of my own i will now (if the article is accurate) struggle to get a mortgage
 
I think what they are saying is currency fluctuations are being bought into play if you are say paid $100,000 and you borrow 5x your salary on a UK home say £350,000 if the currency changes by 10% and your salary becomes devauled you are now borrowing beyond your means.
 
Possibly yeah, i'm just trying to get some clarification.....
 
Mr Bump said:
I think what they are saying is currency fluctuations are being bought into play if you are say paid $100,000 and you borrow 5x your salary on a UK home say £350,000 if the currency changes by 10% and your salary becomes devauled you are now borrowing beyond your means.
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As annoying as I'm sure this is for people not paid in sterling, that does make total sense, as it will protect us (as a nation) from getting into the same sub-prime situation all over again due to foreign exchange rates
 
mjScall said:
As annoying as I'm sure this is for people not paid in sterling, that does make total sense, as it will protect us (as a nation) from getting into the same sub-prime situation all over again due to foreign exchange rates
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Matt, i wonder how you would feel in my situation? i have saved for the past 5 years to put together enough for a 20% deposit and this ruling will make it almost impossible to buy my own home. Surely any sensible lender can take into account currency fluctuations on a case by case basis.
 
Rovers_Andy said:
Matt, i wonder how you would feel in my situation? i have saved for the past 5 years to put together enough for a 20% deposit and this ruling will make it almost impossible to buy my own home. Surely any sensible lender can take into account currency fluctuations on a case by case basis.
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I'd absolutely hate it, but it does make sense that it would be taken into account. It's a simple matter of affordability and with the fluctuations not being predictable I'm not sure how you'd expect them to measure it anything but cautiously.

Like I say it's terrible for those it affects, but it's just another measure that is required to protect the economy
 
I think its a short sighted measure that will affect a significant number of people, there must be hundreds of thousands of people who receive earnings in foreign income, the vast majority of shipping companies pay salary in USD or Euro. The should not make sweeping blanket rulings like this, affordability should be on a case by case basis. Saying you can't have a mortgage just because you don't earn in your home currency is ridiculous. A stupid ruling that punishes people who have worked hard to save and will force people to either rent or change jobs just so their payslip says GBP..........i don't see how it can be workable in the long term, what if someone gets a mortgage whilst on a GBP contract and then switches to a USD/EURO contract? will the mortgage company call it in? as i said it has been poorly thought out and will have fair reaching consequences
 
Rovers_Andy said:
Surely any sensible lender can take into account currency fluctuations on a case by case basis.
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Yes, but that's not the whole story. The article states that the directive will force lender to offer the option to switch the mortgage to the currency of the borrowers' earnings, or the currency of the country of residence in the event of an exchange rate fluctuation. This could potentially cost the lender a lot of money, making the prospect of offering foreign currency mortgages, or sterling mortgages to people paid in foreign currencies much less appealling.

Therefore tt's not just about the risk of borrower default following an exchange rate change making the loan less affordable to the borrower, it places a whole extra risk on the lender which is very difficult for them to account for, possibly to the extent of not wishing to bother. That doesn't mean everyone will withdraw from the market, but the choice may become more limited.
 
onomatopoeia said:
Yes, but that's not the whole story. The article states that the directive will force lender to offer the option to switch the mortgage to the currency of the borrowers' earnings, or the currency of the country of residence in the event of an exchange rate fluctuation. This could potentially cost the lender a lot of money, making the prospect of offering foreign currency mortgages, or sterling mortgages to people paid in foreign currencies much less appealling.

Therefore tt's not just about the risk of borrower default following an exchange rate change making the loan less affordable to the borrower, it places a whole extra risk on the lender which is very difficult for them to account for, possibly to the extent of not wishing to bother. That doesn't mean everyone will withdraw from the market, but the choice may become more limited.
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Yeah i understand that, just struggling to get past the "oh f&^( will i be able to get a mortgage" stage. Hopefully will have some clarification on the impact it will have soon, have emailed the FCA and EU and waiting for my Financial Advisor to get back to me when he's spoken to some lenders
 
I did a paper at University on how accurate the forecasts of currency exchange rates were for 1 and 3 month forecast between the US$ and GBP and found the forecasts were pretty poor overall and when something big happens it really screws the forecasts up. Having said that, I imagine the systems and forecasts are a lot more sophisticated now than when I looked at them. But generally the forecasts then seemed to be just the difference in interest rates between the 2 countries, but in reality a lot more going on than just that, and its not easy which is why forex traders can make or lose millions.

Good luck with getting a mortgage. If you have a 20 % deposit that seems a healthy chunk to me and will hopefully be enough to mitigate the risk of exchange rate movements. And also its not as if you are paid in Zimbabwe dollars.
 
I emailed the FCA for some clarification, according to their statement they have issued the following guidance.

https://www.fca.org.uk/static/fca/documents/ps15-9.pdf

2.30 We are clarifying through guidance that a mortgage denominated in the currency of an EEA
state in which the customer is resident would only be a foreign currency mortgage if the
customer receives the income or holds the assets from which the loan is to be repaid in a
different currency.

So according to that there are ways around it as i could have the mortgage payments taken from a Sterling account as the "assets" for repaying the loan would be in Sterling.....
 
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