Woe the Swiss-Franc Mortgage on Non-Swiss Homes: QuickTake Q&A

Poland is the latest European nation to grapple with the fallout of a once-popular consumer financial maneuver: taking out a mortgage in Swiss francs for a home far from Switzerland’s borders. These Swiss-franc mortgage holders suffered a shock in 2015, when Switzerland ditched its peg to the euro, sending the franc 16 percent higher in a month. That left mortgage holders in Poland, Romania and Croatia and elsewhere suddenly much more in debt.

Switzerland for decades has boasted some of the world’s lowest interest rates, so franc loans were a way for eastern European consumers to escape high borrowing costs in their home countries. In 2008, mortgages taken out in Poland’s currency, the zloty, charged about 8.7 percent in annual interest on average, roughly twice that on similar Swiss-franc loans taken out from Polish banks. As the global financial crisis pushed western borrowing costs to zero, rates on new franc loans fell to 2.7 percent in 2010, central bank data show.