There was an interesting article on FinanceLocator last year, Foreign Currency Loans, which discussed about the new mortgage and loan fad that seemed to becoming very popular despite being very high risk.
The idea is that by taking out a loan or mortgage in a different currency of less value, will gain you additional funds to help you pay off your mortgage quicker.
However, today’s news reports that these multi currency homeowner loans have just suffered a recent blow as sterling falls in value. The success of the scheme hinges on the fact that the sterling remain strong against most major currencies, which was the case until recently, when the pound dropped in value.
Because of this, some financial groups offering foreign currency loans and mortgages have had to revert their books back to sterling, resulting in losses for their customers which will increase a £500,000 mortgage by about £8000.
They had always been advertised as high risk ways to borrow money, relying on a strong sterling rate and the possibility of losing out if this ever changed.
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