The trap of mortgages in Japanese Yens
6 Sep
Between 2004 and 2006, when the real state bubble was in his maximum, complex mortgages in Japanese Yens were a tendency to buy houses at a low cost price. Four years lather, in the middle of a huge worldwide crisis, the followers of this tendency in mortgages are paying it expensive
The magic formula allowed borrowers to reduce interest rates of their mortgages but now with a each time more expensive Japanese Yen, these mortgages are getting though to pay.
During the last days, the Japanese Yen reached a level where one Euro costs just 109,5 Japanese Yens, a maximum unseen for more than 10 years. Since 2008 the Japanese Yen has been increased by more than 50% in value, increasing by this percentage the monthly payments of these Mortgages in Japanese Yens.
Although some multicurrency mortgages allow to change periodically of currency, assuming some commissions, those who adopted a mortgage exclusively in Japanese Yens will have to wait this currency to lose grown in front of the currency with which they earn money.
However, expectations about the behavior of Japanese Yen are diffuse, something that generates unrest to those that have a mortgage in Japanese Yens and to the Japanese authorities as well. A very strong currency affects negatively exportations, for this reason the japanese government manifested that will follow the evolvement of Japanese Yen closely.
“The Bank of Japan will have to take new expansive measures, like the purchase of debt. This is also evident that we will change a situation of high risk aversion to a recovery in trust to investors”
Four years ago, when the real state market was in his hotpoint and prices of houses in the clouds, a large number of banks like Barclays began to trade with mortgages in Japanese Yens
“these products were an alternative for people who couldn’t afford a conventional mortgage, but risks weren’t well calibrated”, explained a banker. However, except in some cases, banks did not trade excessively with this product for the risk it carries.
“Theorically, these loans are just appropriate for people with financial knowledge, that follow the evolvement of currency markets and interest rates. However, a lot of families with medium profile asked for these products without asking for the risk and the way it works”.
Experts pointed that products like mortgages in Japanese Yens, with his advantages and disadvantages are neither good nor bad, but made for a specific client.
Mortgages in Japanese Yens, referenced to low interest rates in Japan, turned into a trap for borrowers due to the change of currency.
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