FX Mortgages, Housing Boom and Financial Stability – A Case Study for Poland (2005-2015)

Poland underwent a quick transition of the economy, but its housing market and housing policy did not change quick enough. The economic growth that followed the EU accession lead to a rising housing demand, which was fuelled by quite cheap FX denominated mortgages. Those allowed many households to satisfy their housing needs quite quickly, but combined with an insufficient housing supply lead to a price boom, that was followed by oversupply. As the housing needs started to be met, the oversupply lead to falling house prices, which in real terms reached pre-boom levels. The recent global and European economic turmoil made the Polish currency depreciate. The effect was very strong when the SNB abandoned the EUR CHF peg and some mortgage takers found themselves under water. Still the majority of the mortgage takers made a good deal and the banking sector remained stable. We present a case study, explain how the FX lending emerged and how we managed to stay safe