Swiss franc mortgage loans from the perspective of Polish borrowers

Foreign currency loans, especially denominated in Swiss franc, were commonly granted in many countries of Central and Eastern Europe in period 2004-2009. In majority, such type of loans was used for financing the purchase of flats or houses but in some countries Swiss currency loans were financing also consumption. In Poland loans denominated in Swiss franc become the most important type of credits used for housing purposes and thus the most significant type of asset in the banking sector. Despite initial high benefits generated for borrowers due to interest rate disparity Swiss franc loans due to strong appreciation of Swiss currency become volatile and strongly influencing financial condition of majority of borrowers. The aim of the paper is to evaluate influence of changes of exchange and interest rates for Swiss currency onto repayment and relative financial condition of borrowers which took mortgages denominated in francs in years 2005-2012. i.e. when such loans were available in Poland. The paper compares costs and benefits of Swiss franc loans against loans in Polish zloty and euro. To assess the relative financial condition of borrowers, the author uses differential indices based on model of mortgage repayment in annuities indexed by exchange rates and interbank reference rates. The results of the research show that Swiss currency mortgage loans, despite strong appreciation of Swiss currency, are beneficial to Polish borrowers taking loans up to 2007 and from 2009 to 2012.