Holiday homes mortgage trap

Published 29th Aug 2009

Thousands of UK investors who were tempted into the foreign property markets of Dubai and Bulgaria may never be able to sell out or refinance, following the withdrawal of domestic mortgage products.

New research by Investors Chronicle, reveals that the subsequent lack of liquidity in these markets has caused prices to slump by as much as 75 per cent.

“No-one is lending in Bulgaria as it’s so unstable, and we’ve had to pull it from our website,” said Clare Nessling, operations director of overseas mortgage broker Conti. “There are no mortgages available on flats or apartments in Dubai. You might get a 50 per cent loan-to-value deal on a villa, but that’s it.”

The research found that, by the height of the foreign property boom, 80 per cent of UK buyers financed overseas purchases with mortgage debt – believing that capital appreciation would enable them to sell to new investors at a profit.

On Bulgaria’s Black Sea coast, desperate sellers are now accepting cash offers of €15,000 from ‘acquirement firms’ on apartments that cost €60,000 to buy.

However, those who have purchased holiday homes in France have yet to feel the pinch. “You can still obtain 100 per cent mortgages in France,” said Nessling. “As house prices have held up, we are doing quite a lot of re-mortgaging in France, where people are pulling euros out of their property to pay off their UK debts.”

Source: ' FT '

View All Latest Articles