Mortgage multicurrency  Rising interest rates and the slowdown already live in the housing market has prompted financial institutions to design mortgages increasingly innovative. Some even can pay the bill off the floor in 50 years. Others give the possibility to pay only interest for the first five years ... The intention is to do a little more easy and convenient payment of the goods, housing, which has come to reach exorbitant prices in several Spanish provinces. Another more exotic options that offer banks and the mortgage is in a currency other than euro, such as pound, yen or the dollar. This alternative can afford to pay much less per month, provided that the currency in which it is based the loan is less strong than the euro and forecasts in the foreign exchange market suggests that such currency could fall further. Despite its appeal, it is a risk option, so you should know in detail the innards of this product. All those who decide to choose to enter a so-called multi-currency loans must be willing to take high risks, have higher financial literacy and monitor the foreign exchange market developments.

What is Multi-currency mortgages?

Multi-currency mortgages are loans that are underwritten by one or more foreign currencies than the euro. The main peculiarity is that they will be indexed to the rate of the currency of the country concerned and to be paid in the currency of that State. Therefore, the first question to be considered to see if interested in hiring this type of mortgage in our country is to know the interest rate prevailing in the country and assess the career that has had its corresponding currency in recent months and what might be its future movement.

In practice, multi-currency credit or loan is made stable currency and low interest rates. Today, for example, Japanese yen or Swiss franc. In other stages, with lower rates, may be interesting, too, such mortgages hire referenced to U.S. dollar, Australian dollar, the New Zealand dollar or the pound sterling. In addition, it is advisable to hire a part referenced to the euro. This will spread risks among the currencies in the event that one had an unfavorable movement.

The risks of foreign currency mortgages

The main factor to consider is the expected evolution of the currency of the country. For example, if you hire a mortgage in yen is expected that Japan's currency will continue to fall, as well offset the currency exchange against the euro. The risk is, therefore, that the opposite occurs. If the yen rises, the monthly pay increase.

In addition, we must take into account the forecasts of interest rates. If you expect rates to rise in the country that you referenced the mortgage (eg Japan or England), the fee will go up in every review. However, as in Spain are rising interest rates, if that country are still below, the mortgage will still be advantageous.

José Luis Martínez, chief strategist at Citigroup in Spain, warning that the person should know that it is always dangerous to borrow in a currency, especially given the volatility of this market, ie, the strong currency fluctuations suffering.

The most interesting Multicurrency Mortgages

Currently one of the claims which may offer some attractive the mortgage in yen. Subscribing to a loan of this type would benefit from the revaluation of the euro against the yen. The interest rate in Japan stood at 0.50% versus 3.75% in the euro zone. So far this year, the contributions of the two currencies have shown unstable behavior, the more beneficial for the euro. In the last twelve months, the yen has lost 12.5% against the euro, and today a euro is exchanged for around 154 yen. Although the future prospects are unclear, yen loans may be interesting in the short term as Japan's currency may fall further.

Although the future prospects are unclear, yen loans may be interesting in the short term as Japan's currency may fall further

Fees to pay each month with this type of credit are linked to Libor (twelve months in Japan stood at 0.08) plus a spread ranging between 1 and 2 points. Meanwhile, variable interest mortgage cheaper in Spain are linked to the Euribor (currently at level 4%) plus a spread that, at best, is 0.3%. With these calculations, a yen loan would be paid an average interest of 1.5% in euros will rise above 4%. According to Francisco Isidro, Bankinter "from the standpoint of rate differential is obvious that the Euribor is rising and the currency market as we are with the yen at a rate of 0.50% and the Swiss franc, with a 2.14%. " "Now, we must bear in mind the assumed exchange rate risk in the operation, and now we are in a busy market volatility especially with respect to the yen, not so much from that of Switzerland, which is much more stable "he adds. According to Francisco Isidro, in either case he decides to enter this type of operation must be clear about the risks and long-term vision.

By contrast, currently not interested in hiring mortgages in dollars (with interest rates in the U.S. located at 5.25%, and the pounds (in England they are also rates at 5.25% and its currency is stronger than the euro).

Who is interested in multi-currency mortgages?

Although at first glance playing conditions for mortgage loans in yen or Swiss francs is not gold that glitters. The customer must follow the market closely, both economic (to see how interest rates go), as the currency (to analyze the changes between currencies).

A further rise in interest rates or depreciation of the euro will mean a higher cost of borrowing significantly. Therefore, if this happens to be taking account will continue to see if the loan is appropriate.

In addition to the usual commissions and must be paid to the mortgage in euros (opening and deleting) will be joined by currency exchange rates. All these problems show that the yen mortgage loan is a type of sophisticated, reserved by institutions to their customers more daring and have extensive knowledge in finance.

In general, the mortgage in a currency other than euro are interesting to experts in market and, especially, for those who receive income in currencies like the yen or Swiss franc, which avoids having to pay the commission for change currency (which may be around 0.5% of the capital loan provisions).

In addition, a mortgage is very useful multi-currency is estimated to be able to pay relatively short, around ten years, which reduces uncertainty.

Another interesting option is to hire multi-currency mortgages and switch its currency in terms of how is the market. For example, today and possibly for a time be beneficial to hire a mortgage in yen. However, if Japan's currency began to rise, not to lose out, would need to be shimmering and changing the mortgage in euros. Francisco Isidro, commercial director of international business Bankinter, ensures that the advice and recommendation of this type of mortgage is only advisable to select customers and always keeping in mind that they know very well the risks arising from their employment. "The first thing to do is to outline the client properly, so as to ensure the adequacy of the marketing of this product," he adds.

Multicurrency Mortgages Limited Offer

Faced with the possibility of hiring a hazardous product must be aware that the offer of this kind of mortgage market by financial institutions is limited. In fact, not usually found advertised in the windows at street level. Internally, if the client requests it, the big banks and they are offered. In particular, two entities that have made mortgages more time of this type are Bankinter and Barclays.

The Mortgage Loan is the loan Multicurrency Bankinter: a loan that you can subscribe in any convertible currency or in euros. This product is exclusively for the acquisition of primary residence. The customer who signs it may be financed in a maximum period of 20 to 30 years, up to 70% of the appraised value of the home. As a general rule, the amount will range between 12,020 euros and 180,303 euros.

However, the customer must deal with a number of committees. The opening and cancellation are 1%. Meanwhile, the exchange commission shall be 2 per thousand (minimum of 15.03 euros). The interest rate is pegged to Libor plus a negotiable with the client, usually from 1 point. The mortgage will be reviewed every month or every quarter.

Bankinter keep in mind that hiring a product of this sort requires caution. To add value and track the market, customers of the entity will receive a report on the changes that have experienced the change of the currency in which it has called the loan. Through email, customers will get a daily report of the department of analysis with a review of financial and currency markets.

To reduce the risk, a peculiarity of the product is that currency can change whenever the customer wants. That is, if the yen, for example, begins to rise strongly against the euro and the client does not want to suffer shocks or have uncertainty, you can change the currency of your mortgage and pass it to euros.

Multicurrency Mortgages

Barclays sold in Multicurrency Mortgages. As outlined in charge of the entity is a product used to obtain advantages in the economic cycle and, therefore, affect the rate of the currencies of various countries.

The Barclays say the Multicurrency Loan is a product aimed at people with financial literacy, which are capable of taking the risk of change that involves borrowing in a currency other than that generated by income. Precisely this feature explains that people can benefit from these loans are receiving their payroll in the same currency subscribed.

This loan, which is reviewed every quarter, you can subscribe in yen, dollars, Swiss francs, sterling and euros. The interest rate is pegged to Libor or Euribor plus a negotiable with the client, around 1.25% and that in no case exceed 3%. The maximum repayment term is 15 years and finances up to 70% of the housing. The origination fee is 2% and the total or partial cancellation of 1%. From Barclays warn parties that there is a risk of currency exchange that will support the client. "The mortgage must be aware that the outstanding debt may increase the equivalent in euros by variations in the price of the currency of the mortgage," they conclude.

The foreign exchange market

Ramón Forcada, Director of Bankinter analysis estimates that in 2007 we should see an appreciation of the euro against the other two main currencies of reference: the dollar and the yen. This, therefore, benefit those who hire a mortgage in yen, as the payment of fees will be lower. However, Forcada points out: "The improvement in the rate of the Japanese economy and the probable, but modest rate increases by the Bank of Japan (BoJ), should lead to a slight appreciation of the Yen against the U.S. dollar ... we only slight appreciation (estimate from 118.75 to 115.00 yen per dollar) because the BoJ to intervene will undoubtedly continue, with some success, to prevent this process, "he adds.

According Forcada, sterling represent the only relevant exception against the euro, as the dynamism of the British economy will probably require some additional rate hike, so we estimate that the parity of the currency against the euro can be seen from 0.67 to 0.65 (1 euro equals 0.67 pounds). "In short, we believe that the pound is the currency of the analyzed stronger in 2007 followed by the euro on the yen, while the U.S. dollar will be weaker."

Article published by Consumer magazine =
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