Impact of EU Mortgage Credit Directive on employees paid in foreign currencies

e06

The EU Mortgage Credit Directive came into effect on 21st March 2016 and has a number of implications. The one in particular I'm concerned with is the impact on eligibility for mortgages to employees working for an overseas company and being paid in their foreign currency.

As a Financial Times article from 2015 explains (it's UK specific but also applies equally to Ireland):

Professionals living in the UK but paid in a foreign currency will see their mortgage options shrink under European regulations due to come into effect next year.

A string of lenders have withdrawn from offering UK mortgages on foreign income in recent weeks, including Halifax, Scottish Widows, Birmingham Midshires, Skipton Building Society and Nationwide.

Their departure from the market has been triggered by the EU Mortgage Credit Directive, due to come into effect in March 2016, which among other things requires lenders to monitor exchange rate fluctuations on such mortgages and warn borrowers if the rate breaches specified limits.

For mortgages denominated in a foreign currency, lenders will be obliged to offer borrowers the option of switching the loan into sterling, effectively shifting the currency risk from borrower to lender.

As they are still absorbing a number of recent regulatory changes, most lenders are reluctant to add to their to-do list for the sake of such clients. “It’s easier for them to say we’re not going to bother,” said Nigel Bedford, senior partner at broker Largemortgageloans.com.

I currently work for a foreign company remotely. I'm based in Ireland, I work for them online and my salary is paid in their local currency. I spoke to one Irish bank and they informed me that every single bank here has decided they will no longer consider applicants whose salary is not in euros. That is their prerogative and while it was a nasty shock, I am trying to be positive and assess my options rather than shake my fist at the EU and bemoan this turn of events.

I'm no legal eagle but from reading the MCD it only appears to apply to people paid in a foreign currency, and it doesn't care if your employer is located in Meath, Massachusetts or Mars. I am currently operating as a sole trader, so my wages are paid directly to me and then converted to euros by my bank. But what if I was to set myself up as a limited company, my employer pays my company for my services in the foreign currency, then I pay myself a salary in euros - would I be right in saying the MCD rules on foreign mortgages would no longer apply? Since I would be working for an Irish company (albeit my own) with a salary paid in Euros.

Are there any other self-employed people contracting for foreign companies that have faced the same situation?

athtrasna

I think banking and finance is a better fit for this thread so I'm moving it from Accommodation and Property.

Mod

e06

Just an update for anyone out there in the same shoes as me who may stumble across this in future:

Both AIB and EBS have confirmed to me that they will still consider applications from individuals with foreign currency incomes. I emailed BOI, Ulster and Permanent TSB but am still awaiting their response but I also spoke to my mortgage broker who confirmed that banks here will continue lending to foreign currency earners. In my case it is a joint mortgage application with my wife who earns in euros, so I can't comment on cases where it's a single foreign currency application or a joint one with both individuals earning in a foreign currency. But banks here are not shutting out foreign currency earners as a rule. You will need to tick all of the boxes in terms of income, affordability etc but that's no different to any other typical mortgage application.