The multi-currency mortgage was a product that gained some popularity in Spain in the years before the financial crisis, mainly because of its seemingly more attractive interest rates, before many borrowers discovered a risk they hadn't properly understood when they signed.
What a multi-currency mortgage is
It's a mortgage loan denominated in a currency other than the euro (usually Japanese yen or Swiss francs, currencies that historically offered lower reference rates than the Euribor), with the option to switch between different currencies over the life of the loan.
The risk many didn't understand: debt in a foreign currency, not in euros
The key feature of this product is that both the monthly payment and, above all, the outstanding principal are denominated in the chosen currency, not in euros. This means that if that currency appreciates against the euro, the outstanding principal in euros can increase, even after years of regular payments - an effect that caught many borrowers off guard, since they hadn't understood this mechanic at the time of signing.
Why it triggered a wave of lawsuits
Similar to what happened with mortgage floor clauses, numerous people affected by multi-currency mortgages took legal action, arguing a lack of transparency and adequate information about the real risk they were taking on, and in many cases obtained favorable rulings that declared the multi-currency clause void on those grounds, allowing the mortgage to be recalculated as if it had been in euros from the start.
Why the lower interest rate didn't make up for the risk taken
The main appeal of this product (a reference rate lower than the Euribor) turned out to be insignificant compared to the risk of the outstanding principal in euros rising considerably due to the exchange rate effect - a risk that in many cases far outweighed any savings from the lower nominal interest rate.
This product is now practically residual
After the lawsuits and growing awareness of these risks, the marketing of multi-currency mortgages has dropped drastically in Spain, and consumer protection rules have set much stricter information requirements for this type of product if it's still offered.
If you have a multi-currency mortgage, review your situation
If you took out this type of product in the past and haven't filed a claim, it's worth consulting a lawyer specializing in banking law to assess your specific case in light of existing case law.
Compare it with a conventional euro mortgage
Our mortgage calculator lets you simulate your payment and total cost with a conventional euro mortgage, without the additional currency risk of multi-currency mortgages.