A UK mortgage where your income is not paid in sterling.

A haircut is a discount applied to income before it is used in an affordability assessment. Lenders apply haircuts to foreign currency income because the sterling equivalent of a fixed foreign-currency salary changes with exchange rates — a borrower earning AED 40,000 per month earns more or less in sterling depending on the current exchange rate. Lenders build in a buffer to protect against downside exchange rate movement over the life of the mortgage.

In practice, haircuts vary significantly between lenders. Some apply a flat 20–25% discount to all non-sterling income. Others apply haircuts based on the specific currency — taking more off emerging- market or volatile currencies and less off stable, widely-traded ones. The most common range is 75–80% of the gross income figure (i.e. a 20–25% haircut), though some lenders are more generous and some are more conservative.

Currency-specific considerations: USD, EUR, CHF and AED are among the currencies most commonly accepted by specialist lenders. USD and EUR are accepted by a wide range of lenders with moderate haircuts. AED and SAR are particularly relevant for applicants employed in the UAE and Saudi Arabia — both are pegged to the US dollar at a fixed rate, which significantly reduces the exchange rate risk and often results in a smaller haircut than genuinely floating currencies. QAR, KWD and BHD are in a similar position. More exotic or volatile currencies receive larger haircuts or may not be accepted at all by mainstream specialists.

How income is received matters as well. If your foreign currency income is converted to sterling and paid into a UK bank account, many lenders are comfortable using the actual sterling deposit amount as the income figure — effectively removing the currency question because the conversion has already happened. If income is paid directly to an overseas account in the local currency, additional exchange rate assumptions are needed.

A larger deposit significantly improves your position where foreign currency income is involved. A 25% deposit not only reduces the lender’s risk but also increases the number of specialist lenders willing to consider your application, because the loan-to-value ratio leaves more cushion against both property value changes and currency movements.

For high-income applicants — particularly those with larger loan requirements above £1 million — private banking may offer better terms than the specialist broker market. Private banks typically assess foreign currency income more flexibly than retail mortgage lenders, and may be willing to lend against an overall wealth picture (assets and income combined) rather than income multiples alone. This is particularly relevant for Gulf-based professionals or those employed by major international employers.

If you are buying UK property from overseas rather than as a UK resident, our Lockhart Murphy International service is specifically designed around foreign currency income and non-UK residency, including dedicated guidance for buyers based in the Middle East and Gulf region.