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dryrot

Lets All Buy A Flat In Cyprus...

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Hi

- what could possible go wrong? -

This weeks latest mad "dreams to nightmares" scenario is those UK savvy investors who bought flats in Cyprus, and financed them with Swiss Franc mortages (at 2.5SF to the UK Peso)....

This was in Saturdays Times but I don't subscribe, here's another account of the mess.

http://www.mindfulmoney.co.uk/5315/investing-strategy/foreign-currency-mortgages-dream-turns-into-nightmare-for-overseas-investors.html

Thousands of people who took out foreign currency mortgages on overseas properties are facing negative equity and repossession as exchange rates move the wrong way.

Back in 2007 and 2008 Swiss franc mortgages were sold to investors buying properties in Cyprus. But the Greek debt crisis has sent repayments on this type of mortgage soaring and many borrowers unable to meet monthly repayments.

If you take out a foreign currency mortgage your mortgage repayments and the loan value in Sterling change with currency movements. But if rates don't work in your favour the amount you owe can spiral very quickly. Investors in Cyprus have found this out the hard way.

Swiss franc mortgages were popular with buyers in Cyprus a few years ago as the interest rate was much lower than that available in the Cyprus pound (Cyprus joined the euro in January 2008). A mortgage in Cyprus pounds would have been at a rate of about 8% but Swiss franc loans had rates of about 4%.

The trouble is, the past three years has seen the Swiss franc nearly double in value. At the same time property prices in Cyprus have collapsed. It's virtually impossible to sell and those homeowners who do try find the sale price is not enough to pay off their mortgage.

This weekend The Times highlighted some borrowers who have been caught out by foreign currency mortgages.

One couple had bought an apartment in 2008 and took out a Swiss franc mortgage with Alpha Bank Cyprus. The deal involved not paying anything for three years and after that repayments were expected to be about £680 a month. However, exchange rate movements mean their monthly repayments are actually £1,100.

Meanwhile falling property prices put the couple in negative equity which makes switching mortgages or selling up very difficult.

etc.

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Further proof that when it comes to making decades-long financial commitments, most Brits don't look beyond the first six months of repayments.

Good to see the word soaring being put to another use though!

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We were in Cyprus for the first time in April. There were multiple hoarding at the side of the road offering 15-30% discounts on holiday flats. One off license we went to gave us a carrier bag that advertised an EA that claimed to have 25,000 properties for sale. There was evidence of half finished developments to, and half empty holiday complexes (although it was the very start of the season).

The property market reminded me of what I saw in Tenerife in 2010. Both distant islands with an over supply of mediocre holiday appartments, heavily dependant on tourism.

High oil prices/air fares will not be their friend.

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One couple had bought an apartment in 2008 and took out a Swiss franc mortgage with Alpha Bank Cyprus. The deal involved not paying anything for three years and after that repayments were expected to be about £680 a month. However, exchange rate movements mean their monthly repayments are actually £1,100.

Meanwhile falling property prices put the couple in negative equity which makes switching mortgages or selling up very difficult.

etc.

:lol:

Morons.

A look at the longterm trend of the Swiss franc versus GBP would have revealed this as financial suicide.

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Was in Cyprus for 4 years until 2007. The prices there were insane then - and have shown little evidence of pulling back. The Cypriots' answer to a shortage of buyers is to raise prices - I kid you not! Greek logic at its finest.

When the Cyp currency changed to the Euro, they just multiplied their old Cyp prices by 1.72 (or whatever the then exchange rate was) to get the Euro price. Of course, when the Euro was then converted to pounds, the prices were out of reach for 99% of British buyers.

Lots of shoddy construction over there - anyone looking to buy would have to do serious structural inspections. Then there is the title deeds fiasco, which has been round and round the Cyprus legal system and is now heading for the EU courts. Some people have been waiting 20 years for their papers on property they have paid off long ago. Add to that the bent solicitors and developers and the place is an absolute nightmare for the unwary investor.

Saying that - it's a great place. I would suggest renting!

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Would now be a good time to get a foreign currency mortgage?

Seriously the only time they seem to get a mention in the UK media is when GPB is riding high. Definitely the wrong time to get one. Isn't it better to get one when the pound is low and with the risk that it doesn't go lower and the upside that the mortgage will reduce if GPB appreciates.

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Would now be a good time to get a foreign currency mortgage?

Seriously the only time they seem to get a mention in the UK media is when GPB is riding high. Definitely the wrong time to get one. Isn't it better to get one when the pound is low and with the risk that it doesn't go lower and the upside that the mortgage will reduce if GPB appreciates.

Yes, however if prices continue to fall (and they will do in holiday areas as they are dependant on excess equity in Northern Europe) you will still end up out of pocket.

Edited by Peter Hun

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Yes, however if prices continue to fall (and they will do in holiday areas as they are dependant on excess equity in Northern Europe) you will still end up out of pocket.

could you not use a Swiss franc mortage to buy a property here in the UK? regardless of price drops, say uoi buy at the bottom of the market, wouldnt you end pu paying less overall as the GBP picked up?

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could you not use a Swiss franc mortage to buy a property here in the UK? regardless of price drops, say uoi buy at the bottom of the market, wouldnt you end pu paying less overall as the GBP picked up?

Yes. However, its difficult to get them, they ask for 40% deposit and sometimes only allow it on very high loans (1million +). Have a search about, channel island lenders maybe an idea. Look for 'Expat mortgage'

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I heard of some Brits out there who live in exclusive gated communities - they are still being charged a monthly premium to live there but their house prices have plunged bh well over half. Lots of Brits in dire straits out there I fear.

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R5L Money programme today had a piece on Swiss Franc Cypriot mortgages; sample case of some Scottish bloke who got cold called (strike one!) some years ago to invest in Cypriot holiday apartments, he mentioned brochures showing communal gardens, pool, gym etc.

He bought two two bed apartments at £120k each, vendor company recommended he use their Cypriot legal firm (strike two!).

Cypriot legal firm recommended he get a Swiss Franc mortgage which he did (strike three!).

He's in the shit now, some mention of him receiving legal advice to stop paying mortgage, some kind of class action lawsuit is going on.

Anyway bank has told him they are coming for him for £380k in the next few months and he is shitting it they can take his UK property.

Presenter of programme and some adviser dissected his errors.

Car crash radio.

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EU introducing laws to protect future borrowers (well, make sure they understand the risk at least)

Rules to limit risks for home buyers

In a move that has come too late to help those who bought property in Cyprus with home loans denominated in Swiss Francs, the European Parliament has outlined rules to limit risks for home buyers.

HOME buyers would be better informed about the costs and risks of taking on a mortgage, partly shielded against market swings that inflate their repayments and better protected if they default on the loan, under new rules provisionally approved by the European Parliament on Tuesday.

But before finalising these rules, MEPs wish to fine-tune them to ensure that they are properly enforced across the EU.

The legislation will cover mortgages on residential property, residential property including an office space and building land. Some of its requirements would be adapted to reflect differences among EU member states’ national mortgage and property markets, but the information for buyers would have to be presented in a consistent format across the EU.

http://www.news.cyprus-property-buyers.com/2013/09/11/rules-limit-risks-home-buyers/id=0015694

Edited by Peter Hun

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  • 311 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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