Polish zloty tumbles 20% against Swiss franc amid mortgage fears

Warsaw (AFP) - The soaring Swiss franc spread panic Thursday among Polish homeowners who have taken out mortgages in the currency, as their monthly payments will jump.

Switzerland's central bank ended Thursday its bid to artificially hold down the value of its currency and it soared almost 30 percent against the euro.

It also soared nearly 20 percent against the Polish zloty, which is bad news for some 700,000 Polish households that hold mortgage loans in Swiss francs.

"This is going to be painful," said Piotr Andrzejewski, a 45-year-old Warsaw media executive who has a loan of 120,000 Swiss francs, adding that his monthly payment will go up by 70-95 euros if today's rate holds.

"It's worse for those who have to sell their apartment today while still paying off the mortgage. It's possible that in some cases the value of the loan will exceed the value of the property," he told AFP.

Analyst William Jackson however said the fallout from the Swiss decision would likely be "much smaller" than a similar situation several years ago.

"The sharp rise in the Swiss franc (...) would have been a cause for panic in financial markets in Central and Eastern Europe (CEE) a few years ago, but there are reasons to think that the fallout now should be more manageable," the analyst with the London-based Capital Economics said.

Swiss franc loans were for a long time the best credit deal around. The craze swept across Poland, as well as Croatia and Hungary, in the early 2000s when the franc was weak and interest rates were lower than those for loans in local currencies.

But in June 2013, Poland's Financial Supervisory Authority (KNF) recommended limiting their number after sensing potential trouble down the line.

Around 40 percent of Polish mortgage loans are in Swiss francs, or the equivalent of around 31 billion euros ($36 billion), according to the KNF.

"What can you do? There's no choice but to accept it," said Polish psychotherapist Roman Kwiatkowski.

"I took out the loan because it was a much better deal than the ones in zloty. I knew it was a risk. Who knows if in the end I benefited or lost out because of it," he told AFP.

"My monthly payments will go up from 1000 zloty (230 euros, $270) to 1200 zloty (280 euros, $330). Given my salary, it's not a disaster."

At 2:30 pm (1330 GMT) the Swiss franc traded at 4.16 zloty -- an increase of 17.6 percent compared to Wednesday. The main index on the Warsaw stock exchange fell by around two percent.