How does Switzerland’s monetary policy influence Swiss franc loans in Austria?
Thomas Jordan, Alternate Member of the Governing Board
Conference «Foreign currency loans», Austrian National Bank (Bregenz branch), Feldkirch, 23 September 2004, 23.09.2004
Complete text in German: "Wie beeinflusst die schweizerische Geldpolitik die Frankenkredite in Österreich?"PDF (212 KB)
In Austria, a substantial proportion of loans are taken out in Swiss francs and yen. The borrowers – the majority of whom are private individuals – do so in an attempt to benefit from the lower interest rates in the foreign currency vis-à-vis the euro. The degree of risk involved in borrowing in a foreign currency is, however, quite considerable.
Unlike in Austria, foreign currency loans play a peripheral role in Switzerland. They generally tend to be taken out by companies and can mostly be ascribed to the borrower’s international business activity. Mortgages in Switzerland are denominated almost exclusively in Swiss francs.
Whether it is worthwhile for an Austrian borrower to take out a Swiss franc loan as opposed to a euro loan depends on developments in the exchange rate and the interest rate differential between the two currencies – both of which are influenced by monetary policy. It is thus vital that lenders and borrowers of Swiss franc loans in Austria have a good understanding of Switzerland’s monetary policy.