Tuesday, January 14, 2014

Dangers of Foreign Currency Mortgage

In the 2000s some of the mortgage borrowers who sold complex mortgage foreign currency losses with high payouts and increasing debt due to large fluctuations in the exchange rate . The borrowers who have been hardest hit them with home loans linked to the Japanese yen has recently been increased to levels not seen in more than 20 years .

Many experts believe that the foreign currency mortgage should never have been sold to clients who do not fully appreciate the risks inherent in such transactions and urged clients to take always professional advice on foreign currency loans .

Japanese Yen foreign currency mortgages that are sold in the early to mid -2000s that the borrower to take advantage of low interest rates in Japan at the time of low interest rates are not in the  . This means that the monthly mortgage payments are cheaper than normal for the mortgage . In 2004the difference yen loan interest rates and sterling interest rate is about 5 percent, so the savings are substantial .

However , the risks associated with foreign currency mortgage is that if the foreign currency increases in value against sterling , monthly installments equivalent rise in sterling terms . In addition , the total amount of debt in sterling also rose .

Shocking figures which describe how great this risk shows that the Japanese yen equivalent based on £ 500,000 mortgage in 2004 will increase to a debt of £ 770,000 in 2009 and a staggering £ 855,000 in 2012 due to the exchange rate of the yen - has risen 200-117 pounds sterling for that period .

Japanese yen , the Swiss franc and the U.S. dollar all mortgages sold by banks in particular famous British expats living abroad , but experts argued that the foreign currency mortgage is only suitable for sophisticated investors who understand the risks . Foreign currency mortgages can be a good solution for some high net worth clients , for example , did not receive their income in sterling or who have large assets in foreign countries . The investor can benefit from the type of transaction but the bank sells the loans in the 2000s to less knowledgeable investors as a means of simply reducing the interest rate to be paid . No settings are managed multi-currency loan to cover the risks related to proved to be a very risky tactics .

Some mortgage borrowers who have been effected by the rise in the yen exchange rate has been reported that they were not fully warned of the dangers of these loans . In addition , many of them are not covered by the  financial services jurisdiction and therefore cannot have their complaints investigated by the  's financial ombudsman .

Mortgage experts believe that high net worth foreign currency mortgages harder to get now than they were ten years ago but many banks still offer this facility in the . Anyone considering a home loan should take professional advice from a mortgage broker with experience in high-value type of loan and ensure they fully understand the risks before approving the loan .

This article was written for Enness Private Clients , which offers expert and specialized focused services for clients who need high net worth mortgage . As a high value specialist mortgage brokers they work with people from all walks of professional life : from lawyers , hedge fund managers and the board of directors for employers and self-employed business people .

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