Borrow in Zlotys or Euro ?

I have just been offered a mortgage for Poland and can borrow in either Zlotys or Euro.

If I choose Euro the bank will allow me borrow nearly an extra 25% (due to the more favourable interest rate) - The more I can borrow,the better as far as I'm concerned,assuming no FX risk.
HAd the amounts I could borrow been more similar then I would definitely go Zlotys to reduce FX risk.
However - an extra 25% is tempting.

Basically - my question is - what currencies have people borrowed in in the past when buying in POland and why?

Also - does anybody have any idea how stable/volatile the zloty will perform against the euro in the forseeable future?

Re: Borrow in Zlots or Euro ?

You're living in Euroland & purchasing an asset in Zlotys, so there is inherent currency risk. I'm assuming you mean risk with paying back the mortgage, in which case the question is how will the mortgage be serviced? If based on a Euro income stream, then borrow in euros, if based on a zloty income stream (local rental?) then borrow in zlotys.

Re: Borrow in Zlots or Euro ?

No - i meant FX rsisk as opposed to the risk on paying back the mortgage.
I plan to service the mortgage by renting.

And you're right - there is an automatic risk by borrowing in Euros.

And normally I would always advise to borrow in the local currency.
However - that extra 25% of borrowing by doing it in Euros is tempting.

Essentially my question is how stable will teh currency be in the next couyple of years given that they are moving towards the Euro?

As in - generally are those currencies stable as they approach their time to enter the eurozone ?

If I look here for the last 5 years, EUR to PLN I get:
Average: 4.16253
High: 4.90500
Low: 3.71425

The zloty is as low as its been in 5 years so depending on what exchange rate you get it might be worth considering locking in a low rate and doing a zloty mortgage.

I have also seen purchasers take swiss franc mortgages paying lower interest rates.

www.currency.ie

qwertyuiop said:

I have just been offered a mortgage for Poland and can borrow in either Zlotys or Euro.

Also - does anybody have any idea how stable/volatile the zloty will perform against the euro in the forseeable future?

Click to expand...

Qwertyuiop. I guess if we knew the answer to that particular conundrum, we'd all be highly-paid currency traders rather than slogging away in our current roles !

Much depends on what aspirational timetable exists for the Poles to join the Eurozone, and what trading band either they (or the ECB more likely) will attempt to "impose" on the market as they near that date.

For anyone that is interested,I decided to go for Euros in the end.

On the plus side, this enabled me to get a bigger mortgage.

On th edown side I am now fully exposed to any currency fluctuations.

Howver - given that I like to buy in good location swhere letting is easily done - and I also like to buy and hold forever then I will probably still have th eproperties by the tim ethe euro-conversion comes around (2011 ??) - in which case I'd be exposed to any exchange rates of the day anyway.

Given that I'm looking at a 2 year build period anyway I think atthis stage i will probably have it in 2011/12 alright.

I probably would have done it in zlotys had the euro-changeover not been on the way.