EU Mortgage Rules To Affect Dual Currency Earners
In March next year, the EU Mortgage Credit Directive will be introduced and the chances are that it will have a big impact on many people working in the city. Although it has a number of implications, one issue which is slightly more complex than the rest, is how it will affect mortgage payers, who receive more than one currency as part of their income.
Receiving numerous currencies is more common than it sounds, with bonus schemes and staff incentives often paid in dollars or euros, but under the new Mortgage Credit Directive rules, if you receive multiple currencies or have foreign assets that contribute to your mortgage, you could now be looking at what is known as a currency mortgage.
A number of European countries, especially in the East, have taken mortgages out in Swiss Francs, usually because it was seen as a more stable currency. However, the price of many of these mortgages went up dramatically, when the Swiss National Bank removed the Swiss Franc’s Peg with the Euro. CHF then surged against the Euro, massively increasing the cost of people’s mortgages.
The Mortgage Credit Directive will require lenders to put measures in place to notify customers about foreign exchange risk and exposure, to avoid instances like this happening in the future, however, borrowers will not be able to switch the currency of their mortgage as and when they want.
It is thought the new rule will see many high street lenders move away from currency mortgages, with more being available from private banks.