Multi Currency loans

Hi I am thinking of taking out a multi currency loan for a purchase here in HK. Does anyone have experience with one of these? If so, i would gladly welcome your opinion/advice on it.

thanks

There are a number of companies here in HK that will not only arrange this for you through the banks but will also manage the currency risk for you for the term of your loan. Boof i have p.m. you with some details, im sure it will help.

Perhaps not quite the right time to be borrowing in currency on HK property however it is nice to have a facility that allows this in the future. As and when HK interest rates increase you have the ability to seek a currency offering lower rates and in the meantime you have the ability to borrow interest only which greatly reduces your monthly outgoings and allows you to be in control of your own budget - not controlled by the banks!

Hmm thanks for you replies. Yes is scares me a little as i would be refinancing my Australian property in HK $$ and while the repayments seem very attractive with HKs low interest rates, the AUD is very strong against the HKD at the moment which makes the switching a little nerve racking...

Got the link to the Standard article? Feel free to post

Foreign Currency Loans



I am writing this general warning to all Australian expats to advise against taking out foreign currency loans, that is unless you are a trader with technical tools and ability.



My most recent experience should be warning enough. The facts are cited below:



1. In December 2008, I phoned my bank to check that my GTC was good.

2. The trader did not allow me to finish my sentence, and traded the HKD loan into an AUD loan at a 12-year historic low.

3. I wrote an email saying that I did not wish to trade.

4. I asked to hear the phone recording so that I could demonstrate that I did not instruct the trade.

5. I went to the bank and was played a compilated recording, a cut-and-paste version of many of my past conversations. This conversation never exisited, and was made in an attempt to show that the trader had followed proceedure. She had not.

6. I said that this was not the recording that led to the trade, and asked for a copy. A copy was refused. The Bank Manager was called in, and he said would conduct an internal investigation, he also asked for a copy of the email.

7. While I had a hard copy and gave it to him, I note that an online copy no longer exists?????

7. The internal investigation concluded after 3 days. The Manager stated in writing that he has listended to the recording and that it was a true and accurate recording of the trade.

8. I requested a copy of the recording. The Bank compilated another recording, this time ironing linguistic inconsistencies between the email and the original cut-and-paste conversation. They sent me a copy of the 'new' recording.

9. I requested a copy of the signed authorisation of this trade. The Bank refused to supply me with the document they say led to the trade, and cited a phone recording is sufficent evidence of a trade.



Please note

1. Compilating recordings in this manner is a crimminal offence and is jailable.

2. For justice to be done, legal action is necessary.

3. Legal action is expensive in HK.



I write the above facts to deter any Australian in HK from taking out multicurrency loans.


Apart from dysfunctional language, one other strategy that may favour the bank is, the trader will not answer the phone, or reply once the currency has plunged increasing your loan size.

CAn you not raise this to the HKMA Robyn?

I have used this facility since the year 2000.


I would not suggest you do this unless you fully understand the product. Furthermore, you should constantly be aware of the exchange rate in case things goes against you.


You should always borrow in the currency that depreciates.


So if the AUD is to rise, you win. If it falls, you lose and might end up paying margin calls to keep the LVR at a certain percentage.


I reckon, it is a tough call at this point in time which way it will go.



Is your property an investment property? If so, don't forget to factor in the negative gearing aspects into your comparisons.


With the low interest rates in HK, you may end up +ve geared and pay tax on your rent. But if the AUD drops, your liability increases and that cannot be offset against your tax.


Finally, if you plan to stay and earn HKD for the next 20 years, it could be a safe bet.


If you plan to stay only a couple of years, then forget it.

It is not rocket science but managing risk is not easy.


My original loan was done at 4.35 (AUD/HKD).


It dropped below this and I had to top up my loan with a margin call. Of course I started getting worried.


I rode it out though as I was earning HKD.


The AUD got to 97c and talk about over parity was in the market.


I was looking for products to hedge the loan but got busy at work and didn't have the time.


By the time I was free, Lehman had collapsed and I still didn't convert my loan even at 80c. It went down to 60c and I was planning to convert if it went back to my original exchange rate.


It didn't and rode the AUD back. I realized at 79c. So saved a bundle on exchange rate and interest rates. however, it was hairy.


I now also have a Margin FX Account which can be used to hedge other loans.

It is not rocket science but managing risk is not easy.


My original loan was done at 4.35 (AUD/HKD).


It dropped below this and I had to top up my loan with a margin call. Of course I started getting worried.


I rode it out though as I was earning HKD.


The AUD got to 97c and talk about over parity was in the market.


I was looking for products to hedge the loan but got busy at work and didn't have the time.


By the time I was free, Lehman had collapsed and I still didn't convert my loan even at 80c. It went down to 60c and I was planning to convert if it went back to my original exchange rate.


It didn't and rode the AUD back. I realized at 79c. So saved a bundle on exchange rate and interest rates. however, it was hairy.


I now also have a Margin FX Account which can be used to hedge other loans.

Yes stitched recordings are apparently very easy to create. Certainly, one would think that the HKMA should fully investigate this allegation in conjunction with HK forensics. Will submit a copy and see what powers they have. Multicurrency loans for this reason are not recommended in HK.