Currency debt management firm, the ECU Group, has launched its range of currency mortgages to the introducer market.
Michael Petley, chief executive of the ECU Group, said: "Our view is that, if an IFA is managing the assets of his clients, he should consider having their debts professionally managed too."
The company has deals with a number of banks including HSBC and EFG, which take on the loans and then release the debt to ECU.
The interest-only mortgages are then switched between foreign currencies with the intention of taking advantage of exchange rate movements to reduce the Sterling equivalent. The currencies used are US Dollars, the euro, Japanese Yen and Swiss Francs.
The loans are aimed at high net worth individuals who are not avers to risk. Loans are only available to borrowers with a minimum income of £75,000 and the minimum mortgage is £100,000, while the maximum loan-to-value is 65 per cent. Charges are based on an annual sliding scale, according to the size of the mortgage from 1 per cent for a mortgage between £150,001 and £250,000 down to 0.25 per cent for loans in excess of £10,000,001. In addition, a performance fee of 15 per cent of the net profit achieved for the borrower each year is payable.
However, not all mortgage brokers would be happy to discuss such products with their clients. Jane Harrison, spokesperson for London & County mortgage brokers, said: "In general we would advise people to think about taking out a mortgage in the currency that they are being paid in, as it takes away the interest rate risk. There will always be niche groups of people who understand the risk involved and think they can use it to their advantage, but they are not the sort of people that we expect to deal with on a regular basis."
Foreign exchange movements can be sudden and substantial. At no stage should you expose yourself to the high risks of foreign currency exposures if you are not able to afford the potential losses that could result from sizeable adverse currency movements and the higher interest rate servicing costs that would be required of you in the event of your having a larger debt.
Denominating debt in foreign currencies may not be suitable for you. Changes in the exchange rate may increase the sterling equivalent of your debt. Your lender will not tolerate too great an increase in the sterling equivalent of your debt as a result of currency losses and may opt to convert your debt back into sterling at a predetermined level. This may result in a permanent increase in the sterling equivalent of your debt which is not fully compensated for by any other benefits derived during the course of The ECU Group plc's discretionary currency debt management services. In this event, you could be left paying UK interest rates on a larger amount of sterling debt than that you originally borrowed. Your home may be repossessed if you do not keep up repayments on your mortgage.
Your lending bank sets a 'Conversion Limit' at which level they have the right to convert your managed multi-currency mortgage back into sterling to prevent further currency losses. It is important to understand that this is a right of your lending bank and not an obligation and that if they do not act promptly to convert your loan back into sterling when your Conversion Limit is reached, your loan could increase by more than that specified by your Conversion Limit.
ECU may from time to time transfer your loan into foreign currencies with higher interest rates than sterling with the objective of achieving a debt reduction in that currency.
Sterling interest rates are subject to change and the differential between sterling interest rates and the interest rates of other foreign currencies will fluctuate.
Suitability
The markets or financial instruments discussed herein may not be suitable for all investors and investors must make their own investment or participation decisions using their own independent advisors as they believe necessary and based upon their specific financial situation and investment objectives. Past performance is not a reliable indicator of future performance, and should not therefore form the basis of a decision whether or not to buy or sell any investments or financial instruments or to participate in any particular trading strategy mentioned herein.
The UK Regulatory System
The ECU Group plc ("ECU") is authorised and regulated by the Financial Services Authority.
In respect of managing physical liabilities in foreign currencies, ECU trades the foreign exchange markets on a spot basis and issues switch instructions to lending banks on a spot basis. Neither of these activities is currently regulated by the Financial Services & Markets Act 2000 as they meet the "Commercial Purposes" test. Therefore you will not benefit from the protection of the Financial Services and Markets Act 2000.
However, if ECU instructs the Lender, or any prime broker or counterparty with whom ECU effects foreign exchange transactions, to conduct a switch by way of effecting an “option” or “futures” transaction for the Client’s account, such transactions may be considered to be an “investment of a specified kind” under the Financial Services and Markets Act 2000. Consequently, both the execution process provided by the Lender, or any prime broker or counterparty with whom ECU effects foreign exchange transactions, and the currency management services provided by ECU, as envisaged under this Agreement, may be considered to be regulated activities. In such instances, the Client may be required to sign additional risk warnings and the rules for the protection of investors under the Financial Services and Markets Act 2000 will apply.
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The views and foreign exchange and interest rate information in this website are based upon information from sources which we believe to be reliable but they are not guaranteed as to their accuracy or completeness. Expressions of opinion herein are subject to change without notice. Any contractual obligation between ECU and its clients will only be on the basis of undertakings contained in an ECU client agreement executed by both ECU and the client, as may be amended from time to time by ECU, and which may vary from any information contained herein. Products and services may be subject to material changes at any time from the information herein. ECU aims to ensure that all information herein is accurate at time of printing, but does not accept any responsibility for its accuracy.
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Currency debt management firm, the ECU Group, has launched its range of currency mortgages to the introducer market.
