UK Mortgage in USD/YEN/EURO

postice

As interest rates are starting to rise (and we are told by the experts this latest rise is not the last) has anyone had experience borrowing in USD/YEN/EURO to remortgage your UK property?

Apart for the large risk but big reward, I had two thoughts. First, is to take advantage of the lower interest rates that exist in non-UK countries. For example, the European Central Bank's current base rate is 3.5% vs. 5.25% for the Bank of England.

Second, is to take advantage of the strong pound. If borrowing in EURO, it is currently at the top of the range since the beginnning of 2003 - currently €1.52 per GBP vs low of 1.38 in 1Q 2003 but has been as strong at 1.73. The exchange rate looks even more favourable if borrowing in USD.

I would be interested in hearing if any one knows of a non-UK lender that would do this and anyone who has any thoughts / experiences. Thanks.

Dazza.mk_2

? I'm not sure I understand your logic in a strong pound being a good thing, as I understand it you are talking about getting a USD/YEN/EURO mortgage on a UK Property?

If that is the case you'll need to borrow in USD and convert to GBP (as you'll need GBP when transacting on a UK Property - unless you can get your current bank to accept USD to pay off an existing mortgage)- you'll therefore gain on the low interest rate and then lose on the high exchange rate (interest rate parity)

postice

Thanks for the reply and yes - I stand corrected, I should have said weak GBP as against the EURO - this wont work for USD. As I noted in my email if borrowing in EURO, it is currently at the top of the range since the beginnning of 2003 - currently €1.52 per GBP vs low of 1.38 in 1Q 2003 but has been as strong at 1.73. So as I see it, the argument to borrow in EURO on the ECB interest rate still works if your bullish on EURO improving against the GBP? I just dont know who will provide it or if its even possible?

Voyager2002

OP, yes, it is possible. When I was last looking for a mortgage (back in 2004) there was a dollar-based mortgage offered by someone unlikely like the Skipton Building Society! The interest rate was incredibly low, since it was linked to the US Federal Reserve rate. However, I decided against it because there was obviously a risk involved, and I did not feel competent to assess that risk.

I think that in the last year there was a post on this board from someone who had taken that mortgage, and had found that rates had moved dramatically against him.

Anyway, I found that mortgage deal on the Charcol site, so if you use Martin's method to get into it and have a very good look, it will probably still be there.

cells

You could theoretical borrow yen (their central bank has rates at 0.25%), then convert it to pounds and buy a house. but you would of course have to pay back the lone in yens.

That is great for you as you could theoretically get a fixed 25year mortgage as low as 0.5% but where the risk comes in is if the pound lowers in value (which it probably will) then you have to pay more pounds to buy your yen to pay the bank with!!

What would have been ideal is to have borrowed yen when the pound was weak and got a 25year fixed deal at about 0.5%

buglawton

Interest rates soon to be nearly double what they were a few years ago (if not today then next month). For the highly-geared among us. This is a big deal especially when many of us come out of fixed rate deals we signed up a few years ago.

If UK interest rates depart even further from the EURO zone norm, it will be VERY tempting to borrow in EUROs instead.

The risk: That later the Euro gets revalued upwards, making your debt higher in GBP
The benefit: Much lower repayments and total cost of shifting your debt towards zero

However, if interest rates, which are underpinned by the UK goverment, get silly silly high then the RISK will be worth taking as that potential revaluation - the only downside holding us back form those juicy Euro loans - can't realistically happen.

A stampede towards EURO based borrowing might even result in a sort of "Black (or White) Wednesday" as happended when the UK ejected itself from the ERM (a govt enforced exchange rate against the European currencies that we had under Thatcher/Major): The currency markets can kick over the UK govt's stance on how to manage our economy.

The outcome will no doubt be new regulations about property - have to pay 25% deposit on property loans, even higher property ownership taxes, swingeing taxes on 2nd home ownership etc etc (rather like Europe is now) and in the end back to lower interest rates.The outcome will no doubt be new regulations about property - have to pay 25% deposit on property loans, even higher property ownership taxes, swingeing taxes on 2nd home ownership etc etc (rather like Europe is now) and in the end back to lower UK interest rates.

Till then, who is going to go first and try to get a EURO loan on UK property?