The Euro: Cheap mortgages for the few

Home Loans

BORROWERS HOPING to cut the cost of their home loans by taking out a euro-denominated mortgage at lower interest rates were given short shrift yesterday by the overwhelming majority of lenders.

With the exception of Barclays Bank, which launched its euro-mortgage this week, and Abbey National, which hopes to do so in the next few weeks, no other lender was prepared to enter the fray.

All lenders cited currency risks as the main reason for declining to offer euro-mortgages. "It is the equivalent of being paid in one currency but paying off the loan in another," said a Halifax spokesman. "If currency rates move against you, you could end up paying significantly more than through a standard mortgage."

Barclays, whose euro-loan was available yesterday, said it was restricting applications to people whose salaries are paid in euros. They will have to pay their salaries into a euro account with the bank while the loan will be restricted to 65 per cent of the value of their home. Abbey National said it planned to operate a similarly restrictive policy.

Barclays yesterday set its euro loan at 4.7 per cent for the next 90 days, when it will be reviewed. On a pounds 100,000 interest-only mortgage, this would mean payments of pounds 371.88 a month. A UK-linked variable rate of 7.7 per cent would mean monthly payments of pounds 614.50 on the same debt.