Abstract

This paper evaluates financial benefits obtained by private clients of banks in Poland resulting from Swiss franc- and euro-denominated mortgage loans against Polish zloty mortgages. As fx mortgage loans were commonly used in period 2005-2009 and quickly dominated Polish banking sector (as well as sectors in many other CEE countries), they became a fundamental element of banks’ assets and a source of risk for borrowers. The main goal of the paper is to evaluate if fx mortgage loans, are more cost-efficient, than loans taken in domestic currency (PLN). To assess the financial benefits, the author proposed mathematical model of repayment of mortgage loans taken in the period 12.2004-12.2012 based on variable interest rates and actual exchange rates. Upon the data obtained from the model, the author used eight ratios for assessments of benefits. The analysis of benefits of fx borrowers was conducted per borrower, per period (month) as well as in form of cumulated benefits for all borrowers and all months of crediting. Upon the research one may find that since 2005 most beneficial in Poland are mortgage loans denominated in euro. They are generally more cost-effective than loans denominated in Polish zloty and most popular in period 2005-2009 fx loans in Swiss franc. The investigation of relative benefits showed also that the most commonly used fx loans denominated in Swiss currency are globally more expensive for borrowers than domestic currency loans. The exception are 30-years loans taken in 2009 and 2011.

Highlights

  • Swiss Franc- and Euro-denominated mortgage loans are crucial forms of financing of real estate in Poland

  • The main goal of this paper is to evaluate relative financial benefits obtained by private borrowers taking fx mortgage loans against mortgages in Polish zloty

  • The rates were adjusted with bid-offer spread to convert the value of installments of fx loans into Polish zloty

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Summary

Introduction

Swiss Franc- and Euro-denominated mortgage loans are crucial forms of financing of real estate in Poland. At the end of 2014 their value amounted to 163 bln PLN and their volume reached 654 thousand contracts Such value concentrated about 47% of value of all mortgage loans in Poland and 35% of their volume. In 2008 the fx mortgage loans reached even 70% of total value of mortgages, what reflected strong development of such form of financing (mostly in Swiss Franc - CHF) instead of domestic currency. Such phenomenon called as "francisation" exposed borrowers as well as banks onto significant

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