Foreign investor, properties in Poland, walk away from mortgages?

Why not ask them?

Anything is better than defaulting.

I intend to soon, just compiling thoughts/opinions here on possible courses of action, before I reveal my concerns to the bank and make them aware of any risk.


Actually, it's not. In order to properly protect yourself from the additional risk due to fluctuations between the value of the asset (the property value, in PLN) and the value of the debt (the loan, in CHF), you would need to arrange a series of FX swaps over the lifetime of the mortgage to hedge out the currency risk. There is nothing simple about that.

I doubt most people who took out CHF-based mortgages in Poland intended to purchase an ultra-risky doubly-leveraged loan. They were probably just told that was the way to get the best rate, as Polish banks were skeptical about the PLN currency and so therefore reluctant to loan in their own currency at a good rate. Well that's what I was told anyway.

His actions! about 90% of mortgages were deniminated in CHF during boom times. I had one, it fluctuated every month. Lets not forget here it works the other way too, the exchange rate between the PLN and CHF is set at the time of siging the loan agreement. If its favourable you stand to make quite a bit. This client was obviously unawarew and got bit big time, add that to paroperty depreciation and wham - there it is.

The mortgage brokers are more than aware of rates between the two currencies, you think theyre going to pass this information on to the client and lose a deal? no way.

In hindseight what any client about to take a Foreign currency mortgage needs to do is check the FX rate history between the two currencies. Its not guaranteed but fairly safe.

Yes, that's the most interesting part. Have a look at CHFPLN over the last 10 years. If you had been looking at it in late 2007/early 2008, it would have looked very "safe" based on the recent years. It seemed to have a steady decline of a fairly regular rate every year until then (around 7-8% lower on average each year). By the way, this is very similar to the profiles of GBPPLN, EURPLN, and USDPLN over that same time period - so that 7-8% had a lot more to do with the growth of PLN, than with any change in any of the other currencies. I'm sure I had a look at these charts at the time, and probably even did some best case / worst case scenarios based on them.

Then in 2nd half 2008, CHFPLN reversed directions and abruptly exploded by 63%. It's been at those inflated levels ever since.

The interesting thing about this is, so did CHFGBP. Although the initial pop against GBP happened a little bit earlier (beginning 2008 instead of mid 2008), the really exaggerated growth happened around the same time. So, the conclusion here is, while pre-2008 it seemed like PLN was the main moving factor here, and it was just a matter of betting on continued steady growth for Poland; post-2008, the combination of falling PLN and rapidly growing CHF has completely reversed everything.

Of course, as they say, "past performance is not a reliable predictor of future performance"...

50% of total mortgages in certain years. There is probably 5million+ mortgages in Poland so its no where near 50%. Some will have been old enough to not be under water due to rapid prices rises.

A lot of overseas investors will have taken the CHF loans., speculators like yourself. Foreign currency loans are for gamblers and you should be aware of that rather than blaming the bank for giving you what you want.


You were investing in a foreign currency loan and your income was a foreign currency. In the US and UK you are not allowed to take that sort of loan except if you have income in a foreign currency. Thats the differance.

Well, if the purchases made in SF were between 2005 and mid 2007, this could mean a lot of people in deep sh1t.

2007/2008 perhaps - especially apartments within major cities, but anything before that and the properties will have enough equity to more than cover the shortfall.

You are aware that many proprieties within major cities doubled in value between early 2005 and mid 2008? yes.

True, so anyone who bought after 'late 2006-07' in SF, could be in deep sh1t, as their property has gone down in price. People before 2005 are fine.

Depends on the specifics, what type of property, size, location, but more importantly the FX rate of the CHF when signing on the dotted line. As a rule of thumb id say anybody that bought a large apartment within a major city (other than Warsaw) after early 2007 would be feeling the pinch. Anything 2006 and before should be OK, 2006 was the real big boom year. The market began to show signs of stagnation third quarter of 2007 if i remember rightly.

I agree

wbj.pl/article-55364-polish-govt-acts-to-reduce-foreign-currency-loan-costs.html

I wrote a couple of articles on this subject in the past, which can be found here:

poland-mortgage-direct.com/articles.html

Definitely get interest only. While you are at it demand a lower interest rate, I don't know what rate you are paying but CHF interest rates are >0.2%, anything above is profit. Threaten them if need be.

Mglaze im sorry mate but ive got even more bad news for you, nobody's touched on the redemption (early opt out of mortgage) fee yet. Now im not 100% on this but i think you need to actually have equity before they can take a slice but i'd guess banks being banks they'd have some small print Polish clause whereby they hit you no matter what.

In any case ive been giving the matter some thought and i know the banks have a serious collective problem here. They should IMO have in place a system where by the client can switch payment currencies, or at the very least review the FX rate between the currencies. Unless they come to some compromise its a lose lose situation for all.

The Polish banks should say to their financiers look we stand to lose X amount of billions here in missed payments alone, we chase the debts costing X amount billions more. We need to offer an incentive to creditors to re-finance. I think the banks need top get in touch with their financiers - go to the board and all that bureaucratic BS - and then refinance every single loan where by if a client is paying more that 30% from the original foretasted monthly payment.

So in a nut shell the Swedish investors or banks are clearly making a killing over this but also taking a cut from the other side of the FX coin. In order to balance it out they need to compromise.

ftalphaville.ft.com/blog/2011/07/14/622806/the-swiss-national-bank-of-poland-and-other-cee-countries

Wow, there have been some really interesting comments and opinions given to this topic.


The 1 bedroom apartment we bought in Wroclaw was bought off-plan at what would probably be considered the peak of the prices. Thankfully, although there was a delay, the developer did complete the build to what appears to be a good standard. (or maybe it would've been better in the long run if it hadn't been built!)


YES Please, any personal recommendations for lawyers would be much appreciated!



To answer these 2 points, of course looking back on it we can admit to some naivety.
Research was done by myself and my business partner, but we made the "mistake" of trusting the property agents who are a UK based company and who set-up the deal and the mortgage... despite them NOT being FSA regulated.

Yes I now know that I should've sort opinions from FSA regulated independant financial advisers before spending a penny, but as Mglaze describes elsewhere things were very different when the deal was done and the Bank offered this type of mortgage as the cheapest and most straight-forward option back then.

Oh the benefit of hindsight, and for wishing the mortgage was set-up through our UK based limited company rather than being our names on the dotted lines!

hello, I am looking for pple who bought a house in Poland with Swiss francs. Could you please contact me via private message?
Thank

As you mention in your post, they are property agents, they are not financial advisors... FSA ?


Depending on the period of time, you bought the property, it could have been the cheapest and the most straight forward mortgage on the market, there are an estimated 700,000 mortgages in CHF/PLN today in PL, as far as I understand the government has been meeting to try and find a solution for mortgages holders of this type. Personally I would contact the agents who sold you the property and set up the mortgage, to find out their opinion and what they are going to do to assist buyers/investors like yourself.


Every dark cloud has a silver lining -Bourgeti lol

This is an apartment in Poland. Still interested??
Please could you briefly explain why you want me to contact you via pm?

Lol, that's the best part actually - the UK based company we dealt with to set everything up went bust and dissolved just around the time the market started to turn downwards, so it's hard to place the blame there, as there is no one left to blame or ask for help from that end.

I think, at least in my case, the decision to go for the CHF mortgage was primarily a result of advice from the mortgage brokers (we spoke to several different ones actually). They all seemed to have the same advice, and the recommendation of a CHF based mortgage for the "lowest rate" was pretty much the universal consensus. None of them did a great job of explaining how the product worked, or what risk was involved. They actually made it sound very simple, as if it was just a number for the value of the loan or something. The relation between the currencies was never properly explained by the mortgage brokers or anyone else, and the simple manner in which it was explained made it seem like there was no reason to suspect it might be more risky or complex than it seemed.

Unfortunately I just don't think the mortgage brokers who sold us these loans in the first place really have any reason to care about helping us out now.

You should have gone to an IFA (Independent Financial Advisor) if you wanted an explanation of the risks and issues involved. The fact that you obviously didn't makes you entirely responsible. IFA are insured and would have given you someone to sue, if they had advised you to take a FX loan (which they probably would not). The salesman isn't responsible for your buying decision, unfortunately.

In Poland?? forget about this option. You sign currency risk declaration that you are aware of the risk, not the adviser. Might be this works in other countries but not in Poland.

No, in the UK.

mglaze

How are you getting on?

I would like to know how did you approach the situation.
I can imagine that a lot of People in Poland have very similar problem. I do not think that the initial 1800zl did go up to 3600zl. I have started to pay about 2300zl and it came up to 2800zl, I am not sure why , because my father is taking care of my investment and looks like even though the value of zloty came down a lot the LIBOR or some other interest came down.

I agree with you completely that banks have a big problem, not only banks but Polish government as well, if what you are saying were true people would not be able to cover the bills and with so many mordgages the whole economy of poland would loose.

I do not even follow it precisely but know that the very high payments lasted for one or two months, Polish people are use to this, there have been problem of inflation and all other unstable problems throughout history so i would think a lot of people do not want to give up the apartments or hoses, firstly because there is no possibility of bankruptcy.

To sum up.
Today you have a loan the is twice and high as the value of your house or apartment.
In a matter of one year or two or let's say three years Polish zloty can get stronger let's say 2.5 for Swiss , I know that this seems very unlikely but in reality it is possible.In this case you are almost even. In todays world does not matter if you are in California, Florida or London the economy is slow and especially real estate that has been bought in 2007 does not look good.

I think this is all BS and if I could i would leave the mordgage today, unfortunately in Poland there is no way to get rid of this loan and there are a lot, I mean a lot of people in the same position.

I am actually looking for someone that would help me to get out of this loan but from the experience i know that the best option is just wait and hope that things will turn around.

Poles are very interesting when you ask average Pole how much do you make a month they tell you 2000zl is average, 3000 zl is pretty good but they drive 100 000zl cars and this is the average car. The same goes to mordgage payments even though the payments go up 40% for some reason they will pay it, in stead of go out on the street and say hej, this is pure BS we got the loan but something is wrong we do not want to pay it this high.

I do not know, investments are like this, it would be sweet if you could take a loan send couple hundreds pounds for several years and then cash out , this happens but not always this is part of investing, and now we are simply loosing.

Why "unfortunately" ?


LOL ! What do you think then would happen with this debt ? Would it disappear ? No really, someone else would have to pay it back. Please tell me why others should pay back debts, which are not their own ?

Who has given you advice about the value of your apartment? first time I've come across somebody in this situation. Where is your property?

It's much more about changes in currency exchange rates than the value of property itself.

because we didnt ask for the system as it is, it was forced upon us, because the government have the authority to bail out banks for billions using OUR TAX money, if the government does it (pay debts which are not their own) why cant we?

what I think he means is if you take out a mortgage on a 100,000 euro property, you will have to pay back 200,000 euros over the life of the mortgage

it is normal however it gives you the advantage of having somewhere to live whilst you pay off the mortgage :-)

it is not clear though