Foreign currency mortgages are only suitable for those who are aware of the risks involved and can cope with potential increases in the amount owed on the mortgage.

In the 1980s and early 1990s many people took out single currency loans – some with disastrous consequences. The preferred vehicles for most were single–currency loans in either Japanese yen or Swiss francs as they seemed to offer a low interest rate compared to the double–digit rates seen in the UK. Unfortunately these borrowers saw the pound weaken considerably against other currencies, causing the sterling equivalent of their loans to increase dramatically. For example, a million pounds borrowed in yen in 1980 would have become four and a half million pounds by 1995.

Currencies can easily fluctuate by 15% over the course of a year, so for most individuals, the volatility of the foreign exchange markets and the need for extensive analysis and monitoring has meant that managing foreign exchange risk extends beyond the scope of their resources. In the absence of the client having currency trading experience, most lending banks will not extend a multi–currency loan facility.

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