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Why are the Poles following the Swiss Franc?


rybnik 18 | 1,462
10 Aug 2011 #1
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?
Marek11111 9 | 816
10 Aug 2011 #2
most stable currency in the world and Swiss are banking cockroaches of the world.
skysoulmate 14 | 1,297
10 Aug 2011 #3
So, please tell me why is the Polish media following the Swiss Franc?

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
delphiandomine 83 | 17,726
10 Aug 2011 #4
So, please tell me why is the Polish media following the Swiss Franc?

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.
shinga
10 Aug 2011 #5
because Polish banks tend to prohibit people from actually paying the mortgage in CHF

It wasn't the banks but the Polish banking law. However, they plan on changing that (if they haven't already).
Wroclaw Boy
10 Aug 2011 #6
so they can screw the client with poor exchange rates.

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.
skysoulmate 14 | 1,297
10 Aug 2011 #7
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
Seanus 15 | 19,706
10 Aug 2011 #8
My student often talks about the Swiss Franc. He describes getting involved as being risky but for those that know what they are doing....
pip 10 | 1,661
10 Aug 2011 #9
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???
pgtx 29 | 3,159
10 Aug 2011 #10
if you got credit in 2008... in Poland

Poland Frank
BBman - | 344
11 Aug 2011 #11
I think lepper had his mortgage in francs, one of the reasons he called it quits.
pip 10 | 1,661
11 Aug 2011 #12
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.
LwowskaKrakow 28 | 431
11 Aug 2011 #13
.did all these "specialists" not think that the franc would ever have an upward turn???

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.
skysoulmate 14 | 1,297
11 Aug 2011 #14
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.
Eduardo - | 3
29 Sep 2011 #15
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
peterweg 36 | 2,316
29 Sep 2011 #16
Its a great idea now.
bullfrog 6 | 603
3 Aug 2012 #17
it's only in recent times that the Franc has gone up, and up, and up, and up...

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)

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.

No longer the case, you can pay direct in CHF


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