Why are the Poles following the Swiss Franc?

One of the reasons(but far from the main reason) I went into Medicine was because I do not have a head for math and finance. So, please tell me why is the Polish media following the Swiss Franc?

most stable currency in the world and Swiss are banking cockroaches of the world.

When several of the Central and Eastern European countries were beeing integrated into the EU lots of Poles, Czechs, Hungerians, etc. took out mortgages denominated in Swiss Francs, at the time it was a good move as the interest rates were pretty low and the Franc was relatively stable but since then it has gained against most currencies and rates have gone up, a double-whammy for those with Swiss franc loans. However, the Swiss Central bank just lower the interest rates so hopefully homeowners with those loans will get a little breathing room. Not for long though, I think the franc will stay strong for a few more years... Just my prediction.

In hindsight borrow in zloty and save in franc would've been better

Pretty simple - as Sky says, many of them took mortgages in CHF.

Essentially, the CHF/PLN rate was very stable once the PLN was introduced in 95 - it was always sitting around the 2PLN-1CHF mark. That, combined with low interest rates on the CHF made it incredibly attractive for people to take a mortgage demoninated in Francs rather than Zloty - it's only in recent times that the Franc has gone up, and up, and up, and up...

Others will know the actual interest rates better than me, but I recall figures of 2% for CHF and 8% for PLN being thrown around a few years ago. Clearly, 6% would be a hell of a difference in the long run for a mortgage - hence why people took CHF rather than PLN mortgages.

It's not the full story though - because Polish banks tend to prohibit people from actually paying the mortgage in CHF, so they can screw the client with poor exchange rates. For instance - let's say you go to Switzerland, work for a summer on some farm and come back with a decent amount of Francs in your pocket. Instead of going straight to the bank and saying "here, take this for the mortgage" - you have to convert them into PLN, then pay the bank in PLN - who will convert it into CHF for you.

It wasn't the banks but the Polish banking law. However, they plan on changing that (if they haven't already).

Thats not the reason, the exchange rate for the repayments is set on signing the mortgage contract. That will never change only the FX rates will affect that, thats where the make or break lies.

So Polish bank borrows X amount of CHF at 3% APR, then puts another 1.5% APR on top, Total APR payable by the client 4.5%, Polish bank makes 1.5% for brokering the deal.

From today's Bloomberg.com

Poland Needs Franc-Hit Consumers to Propel Economy, Tusk's Adviser Says

Swiss Franc Effect
...The zloty's decline against the franc was 20 percent in the past two months, which may cut consumption by 0.4 percentage points, the economic council headed by Bielecki said in an Aug. 8 report. First-quarter consumption rose 3.9 percent from a year earlier.

Franc-denominated mortgages totaled 151.8 billion zloty in June, accounting for almost 53 percent of total home loans, according to the Polish financial regulator.
Tusk's government forecasts 4 percent economic growth for next year. Poland is relying on the expansion to narrow the budget deficit to 2.9 percent of gross domestic product in 2012 from 7.9 percent last year. The central bank last month lowered its growth forecast for next year to 3.2 percent..."

bloomberg.com/news/2011-08-10/poland-needs-franc-hit-consumers-to-propel-economy-tusk-s-adviser-says.html

My student often talks about the Swiss Franc. He describes getting involved as being risky but for those that know what they are doing....

no, it is too riskey- even for those who know what they are doing. It is an abstract currency- Switzerland has no obligation or ties to Poland. Whoever decided it was a good investment should be burned at the stake. For all those who bought Swiss franc- they might as well have purchased New Zealand dollars or Mexican pesos. There is no sense to it.

They are not in the Eu. They don't need to be and never will be.
At least if you buy a mortgage in Euros- eventually Poland will take the Euro- I am talking 5 to 8 years down the road. But typically a mortgage is purchased for 25 years. ....did all these "specialists" not think that the franc would ever have an upward turn???

if you got credit in 2008... in Poland

I think lepper had his mortgage in francs, one of the reasons he called it quits.

actually it is looking more and more like Lepper was actually murdered. If you think about it- he was too arrogant to kill himself, he thought he was a super star.

You are totally right. Some people are naive and will get whatever is cheaper at the time and will believe anything a bank employee who gets bonuses will tell them.

Honestly it is sad that one must always mistrust every ine and double check everything.

This approach isn't really that unusual although it's not recommended for daily life expenditures (such as mortgages). If you think your own currency will rise, save in it and borrow in foreign currency. If you think it'll drop, do the reverse, borrow in it and save in foreign. I've diversified my savings to several currencies.

freaking mortgages in CHF. 5 yrs ago people thought it was a good idea , not anymore though - franc's getting stronger and stronger against zloty, which basically means higher monthly mortgage installments

Its a great idea now.

If one looks over a short period yes, but not if ones takes the long view, as one should . In fact, the "stability" of CHF has been an exception rather than the rule: 1$ was worth a tad over 4 CHF in Aug 1971, today it is less than 1 CHF... So the CHF has gone up over a long period , or the $ down depending which way you want to look at it (and currency appreciation is the chief reason why salaries and prices in Switzerland appear high to foreigners)


No longer the case, you can pay direct in CHF