While we might not feel badly for those second-home owners who are having issues in the UK, there certainly are a lot of them. More than 300,000 second-home owners who have euro-denominated mortgages are feeling the crunch. The first interest rate rise since July of 2008 is occurring now, which is causing rising mortgage rates and a fall in the value of the sterling against the euro.
As a result, Adam Jordan, a senior currency expert at Moneycorp, for instance, said that their company has seen a 40pc rise in the number of people bringing large sums of money back to the UK during the first quarter of 2011, compared to what they saw in the last quarter of 2010.
With the expected increase in interest rates again in September 2011, Adam Jordan believes that the problem will only get worse. Many of those who are repatriating their money have only recently been able to sell their homes after the property crashes in Spain.
Who will be hardest hit by these changes? These issues will most affect people with second homes abroad and pensioners who are living abroad but using their savings income and other sterling-denominated pensions.
For many people, the combination of the rise in rates and the slumping sterling has put their dreams of living in France or Spain on the back burner. Those who have invested in properties in these places are finding it very hard to keep up with the rising mortgage demand.
Investments Gone Sour
David Vindel, a senior public relations consultant from London, for instance, had bought two properties in Spain to rent out recently. His mortgage costs have drastically increased, however, and he can’t sell them because of the slumping property prices in Spain.