TYLER MORTGAGE MANAGEMENT - INDIVIDUAL EXPERT ADVICE
Foreign Currency Mortgages
Foreign currency mortgages are not for the faint hearted.
You will probably be exposed to foreign currency loans if you buy a home overseas, which for all sorts of reasons has increased risks compared to those associated with living in the UK and owning properties here. We have contacts in most of the major countries where UK citizens favour buying second homes and will be happy to guide you to an appropriate solution in the country of your choice.
It is also possible to arrange mortgages in major foreign currencies to finance your UK home or even a managed foreign currency loan. Most foreign currency loans are arranged in US Dollars, Euros, Swiss Francs, & Japanese Yen, although other currencies are available.
At TMM we have experience of arranging Foreign Currency dating back to 1980. Originally popular with foreign workers (mainly bankers at the time) whose income was mainly paid in Dollars or Deutschmarks (at the time) they chose to link their mortgage repayments to their income currency to avoid some of the currency risk. At the time Dollar and Deutschmark rates were lower than UK rates, however, this did not remove the risk of their debt increasing if Sterling depreciated against their chosen currency but often these borrowers worked in, and knew the risks of, currency exchange.
When UK mortgage rates were 15% or more in the very early 90s and Swiss Franc interest rates were around 4% many ill advised desperate victims of the recession in the UK opted for the “safe haven” of lower foreign currency mortgages rather than be forced to sell their homes. Sadly quite a few of these borrowers with no knowledge of the risks involved ended up with larger and more expensive Sterling mortgages as the value of Sterling fell. Then the banks automatically converted the borrower’s, now larger, mortgages back in to Sterling at higher rates than they would have been paying with their original lender. At the time we refused to offer such facilities to clients unless they demonstrated a good knowledge of the workings of the currency markets (through their occupation) and thus avoided the sort of issues that many ill informed novice borrowers suffered at the time.
So in today’s record low interest rate environment why consider such an arrangement? Well today’s sophisticated (and asset-rich) borrowers can take advantage of a managed currency mortgage. Under this arrangement the borrower allows an independent currency manger to control the debt and switch it between currencies with the sole intention of “beating the market” so that each year the level of Sterling equivalent debt drops (even on an interest only loan) and this “profit” from trading does not attract tax in the same way as a normal investment might. Clearly the debt managers cannot always get the trades right – so as we said this still remains not a choice for the faint hearted or those who cannot afford to see their debt increase.
If you are in the market for such a facility we can work with you to decide both the most appropriate lender, and if appropriate, introduce you to the management companies who manage currency mortgages.
Changes in the exchange rate may increase the sterling equivalent of your debt.
For Foreign currency mortgages we act as introducers
Foreign mortgages are not arranged via Sesame Ltd or regulated by the FCA.
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Your home may be repossessed if you do not keep up repayments on your mortgage.
To discuss your current or future mortgage requirements please call 020 7930 7242.
A typical fee for arranging your mortgage is 1.5% of the loan amount.
