The risks of taking out a mortgage in a foreign currency have been sharply highlighted by the economic downturn in eastern Europe, where many locals have borrowed money to buy their home in Swiss francs and other currencies. In Hungary, it has been estimated that more than 90% of the mortgages issued last year were in Swiss Francs or Euros; in Poland the figure is around 60%. The attraction in each country was that money could be borrowed at lower interest rates than a loan denominated in their own currency.
However, a steep fall in the value of both currencies over the last six months - Poland's zloty has effectively halved in value against the Swiss franc - means that homeowners are now having to pay up to double their previous payments each month to service their mortgage. The Czech Republic has a smaller but similar problem.
This is a cautionary tale against taking out a mortgage in a foreign currency, even if you are buying your property overseas. British buyers who took out Euro-denominated mortgages when the pound was worth around €1.50 will also be feeling the pain with the sterling now around the €1.15 mark. On the other hand, if you are convinced that the pound will stage a recovery in the not too distant future, taking out a Euro-denominated mortgage now could prove a good bet - as your repayments will be reduced accordingly.
In the late 1980s, when UK interest rates were sky-high, some homeowners were rashly encouraged to take out mortgages denominated in Japanese yen to take advantage of much lower rates; the real lesson is to think carefully about what you are getting into before you turn your home into a play on the foreign exchange market.
Alexander Garrett is a freelance property writer who contributes regularly to The Observer and British Airways' Business Life.