Since the historic Brexit vote in June 2016, the United Kingdom’s exit from the European Union has been the subject of intense scrutiny and discussion. One area that has been particularly affected is that of mortgages. For many years, EU nationals have had the same rights to apply for mortgages in the UK as British citizens. However, Brexit has brought significant changes to the status of EU nationals in the UK, impacting their ability to secure a mortgage. This article unravels the complexities of this issue, breaking down the effects of Brexit on the mortgage approval process for EU nationals.
Changes in the Status of EU Nationals
Brexit has prompted a shift in the way the UK government views EU nationals living within its borders. Until Brexit was settled, EU nationals had the same social and residence rights as British citizens. They could live, work, and apply for mortgages just like any other UK citizen. However, Brexit has brought significant changes to the rights of these individuals.
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EU citizens living in the UK as at 31 December 2020 are required to apply to the EU Settlement Scheme by 30 June 2021 to continue living in the UK after this date. The UK Office for National Statistics estimates that approximately 3.6 million EU citizens lived in the UK in June 2020. Thus, the potential impact on the mortgage market is substantial, given that these individuals must now navigate a new immigration status.
Impact on the Mortgage Approval Process
Brexit has directly impacted the mortgage approval process for EU nationals. They now have to provide proof of ‘settled status’ or ‘pre-settled status’ from the UK government. This is a clear departure from the scenario just a few years ago, where EU nationals could apply for mortgages based on their EU citizenship.
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Settled status is granted to EU nationals who have lived in the UK for a continuous five-year period. Those with less than five years of continuous residence will typically receive pre-settled status. Both statuses permit individuals to apply for mortgages, but they also introduce an additional layer of bureaucracy that could potentially complicate the mortgage approval process.
The Role of Banks and Lenders
Banks and lenders play a crucial role in the mortgage approval process for EU nationals post-Brexit. As immigration status has become an important factor, lenders now have to verify this status during the mortgage application process. The level of caution exercised by banks may also have risen due to the perceived increased risk associated with lending to individuals whose immigration status might change.
Moreover, some reports suggest that certain lenders are now less willing to offer mortgages to EU nationals due to these new immigration requirements. This shift can be attributed to the increased administrative work and due diligence required to verify immigration status.
Brexit’s Broader Impact on the Housing Market
Beyond the mortgage approval process, Brexit has had a wider impact on the UK housing market. The uncertainties surrounding Brexit led to a slowdown in the UK housing market, with fewer people willing to make significant investments such as buying a house.
However, this effect was not confined to EU nationals. Many British citizens, too, were reluctant to enter the housing market. The Royal Institution of Chartered Surveyors reported in June 2020 that the housing market had seen its lowest levels of activity for over twenty years.
The Road Ahead
While Brexit has undoubtedly complicated the mortgage approval process for EU nationals, there are signs that the situation is slowly stabilising. As banks and lenders adapt to the new immigration requirements and as more EU nationals secure their settled status, the mortgage market is expected to regain some level of normalcy.
However, Brexit has permanently altered the UK’s relationship with the EU, and the long-term consequences for EU nationals in the UK – particularly in areas like housing – remain to be seen. The British government, banks, and lenders will need to work together to ensure a smooth transition and to uphold the rights and interests of EU nationals in the UK.
The Settlement Scheme and its Implications
Post-Brexit, the Settlement Scheme has become a buzzword in the mortgage application process for EU nationals. Established as a part of the withdrawal agreement between the European Union and the United Kingdom, this scheme allows EU, EEA or Swiss citizens to apply to continue living in the UK after 30 June 2021.
To apply for either ‘settled’ or ‘pre-settled’ status, EU citizens and their family members must provide proof of continuous residence in the UK. Settled status is granted to those who have lived in the UK for a continuous five-year period, while pre-settled status is for those with less than five years of continuous residence.
This distinction is critical in the mortgage approval process as it determines the individual’s right to access social security benefits and their eligibility for permanent residence. Notably, ‘pre-settled’ status holders do not have the automatic right to access social security benefits, which could potentially affect their financial stability and their ability to secure a mortgage.
It’s essential to understand that the Settlement Scheme applies to Northern Ireland as well, affecting both EU citizens and their family members living there. The application process, however, can be a daunting task, particularly for those unfamiliar with the complexities of the UK immigration system.
Brexit’s Long-Term Impact on EU Nationals
As Brexit has reshaped the landscape of immigration and housing in the United Kingdom, its long-term impact on EU nationals continues to be a subject of discussion. While the immediate effects are evident in the increased bureaucracy and the uncertainties in the mortgage approval process, the full scope of its impact, particularly on permanent residence and British citizenship, is yet to be fully understood.
The Migration Observatory at the University of Oxford notes that Brexit has ended the free movement rights previously enjoyed by EU citizens. This radical change, coupled with the looming uncertainty of the post-Brexit era, could potentially discourage EU nationals from seeking permanent residence in the UK.
This could, in turn, affect the demographics of certain areas in the UK, where EU nationals have traditionally resided. This demographic shift could potentially have long-term implications for the local housing markets in these areas.
EU nationals now face a new reality in the UK, where their immigration status plays a pivotal role in their ability to secure a mortgage. While the situation appears to have stabilised to some extent, the full impact of Brexit on EU nationals in the UK will continue to unfold in the years to come.
For now, the British government, banks, and lenders must continue to work cohesively to ensure a smooth transition for EU nationals during this period of change. They must uphold the interests of these individuals, particularly in areas like housing, to ensure that they continue to enjoy their rights and benefits despite the challenges posed by Brexit.
