A number of private banks have scrapped the foreign currency mortgages they once offered as borrowers have been significantly affected by a fall in the value of the pound.
Loans in foreign currencies were offered by Royal Bank of Scotland, Lloyds International and Barclays Wealth before the economic downturn, the Financial Times reports
Property owners looked to utilise lower interest rates in countries such as Japan and Switzerland to reduce the amount they would need to repay when purchasing second homes or making other investments .
However, the dramatic weakening of sterling has resulted in a situation where borrowers now owe far more than the interest rate savings.
The pound is now 25 per cent lower against the US dollar than it was in 2007 and has dropped by eight per cent in 2013 as a result of fears the UK is heading towards a triple-dip recession.
Foreign currency mortgages were usually only offered to wealthy borrowers, but Simon Conn, an overseas property specialist, said brokers often pushed them on people without the requisite understanding of the foreign exchange market.
“Banks took advantage of people who didn’t have enough knowledge. They were aggressively sold,” he stated.