Expats to be hit hard as mortgages soar

Rising mortgage interest rates, falling house prices and weakening currencies pegged to the dollar are creating a perfect storm for British homeowners living in the Gulf.

The triple whammy is creating misery for homeowners that have to cover mortgages in the UK while earning in the Middle East.

Add in the spiralling cost of living in all GCC countries and there has never been a time when disposable incomes for expats have been under so much pressure.

"The cost of my UK mortgage in terms of dirhams has been rising consistently since I arrived in Dubai a couple of years ago because of the weakness of the US dollar," said a British financial services professional who asked not to be named.

"Now I am coming to the end of a fixed term low interest rate deal on my mortgage and I believe my monthly payment will rise by £130 - that's almost Dhs1000 extra I have to find," he explained.

Fixed rate deals are common for UK mortgages. As they expire, borrowers shop around for new deals, but lenders will not be so generous for the remainder of this year as underlying bank lending rates continue to rise.

Halifax, the country's largest mortgage lender, will increase the rates on many of its variable tracker products by up to 0.2%.

That will mean that a borrower coming to the end of a discount rate of 4.35% - a typical rate offered two years ago - will find monthly mortgage payments rise by about £150 for a £200,000 mortgage.

Aroud 468,000 homeowners are due to see their fixed rate deals come to an end before the end of the year, according to the Council of Mortgage Lenders.

House prices are also falling, albeit only marginally and only for the past month, according to a survey conducted by the Royal Institute of Chartered Surveyors (RICS). Just over 50% of surveyors said they witnessed a drop in house prices in August.