Mortgages in EUR: a safe choice for EUR earners

Mortgages in EUR: a safe choice for EUR earners

Foreign currency mortgages are a high-risk investment out of the GBP-EUR circuit. The Spanish Consumers and Users Association (OCU in Spanish) confirms through a study that these mortgages have translated into great losses for their holders. A good example of this is the JPY-based mortgages for EUR earners: Their mortgages have increased a 25% on the last year.

The risk of foreign currency mortgages resides in the currency fluctuations, more significant than the changes on internal interest rates. The OCU accuses financial institutions of misleading clients by omitting information and not mentioning that the continuous revaluation of the EUR could only mean a high risk of later devaluation.

During 2007 and 2008, under the pressure of a rising Euribor, Spanish financial institutions started offering foreign currency mortgages to their clients –especially in JPY- arguing that the interest rate of the JPY mortgages was much slower than the Euribor.

Throughout 2010, the Japanese Yen has gained approx. 25% value against the EUR. This means not only an increase of 25% on the monthly instalments, but also a 25% increase of the total amount to amortize; for example: On a mortgage for 200,000 EUR to JPY in 2009, the debtor will see its debt raised to 250,000 EUR after a year.