Polish borrowers sleep soundly when the Swiss franc breaks records

The Swiss franc is currently the strongest against the euro in years. However, Poles repaying loans in CHF may feel some relief. Due to the strengthening of the Polish zloty, the franc in our country has become almost 30 groszy cheaper since September. And the installments paid by Poles dropped by almost 6%.

CHF is the strongest in over 40 years

The Swiss franc exchange rate has fallen below EUR 0,95 in recent days, which means that the franc is the strongest in over 40 years. The rate broke the peak from the so-called "black Thursday" (January 15, 2015), when the franc strengthened dramatically after the decision Swiss National Bank about abandoning the defense of the minimum exchange rate of EUR 1,20 per CHF. There was then a significant strengthening of the franc against the zloty, which significantly increased mortgage loan installments (expressed in francs) for hundreds of thousands of Polish borrowers.

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The franc is strengthening due to investors' belief that the European Central Bank will start a series of interest rate cuts earlier than its Swiss counterpart. It is true that rates in Switzerland are 1,75%. and are more than twice lower than in the euro zone (4,5%), however, this country is considered a safe investment haven, especially in the period of increased geopolitical market risk that we are currently facing. The market currently estimates that the first rate cut in the euro zone may take place in the first quarter of next year, and in 2024 the rates will be reduced to 3%. It seems that the current level of rates is sufficient to enable inflation to be brought down to the target of 2%. In November, inflation in the euro zone was 2,4%.

The market is counting on rate cuts in 2024.

Bank analysts UBS they expect that the first rate cut in Switzerland will take place in June, and that rates will fall to 1 percent throughout the year. (three cuts of 25 bp each). In November, inflation in Switzerland was 1,4%. (down from 1,7% in November), which means it is already below the central bank's target, which is also 2%. On a monthly basis, deflation was recorded in Switzerland in November - prices fell by 0,2%. Also 1,4 percent is the core inflation in Switzerland, i.e. inflation that does not take into account the most volatile energy, fuel and food prices. Despite such results, the SNB still maintains a hawkish stance, and its representatives keep emphasizing that inflation has not yet been completely defeated and, if necessary, monetary policy may still be tightened. There is no doubt, however, that the strong franc is a burden for the Swiss economy, as products from this country are record-breakingly expensive on world markets.

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Such factors determine the exchange rate of the franc against the euro; for Polish mortgage borrowers, many of whom still pay installments expressed in this currency, the exchange rate of the zloty against the franc is important. Due to the strengthening of the zloty, which has gained 6,5% against the euro since October. the current increase in the value of the franc does not translate into record quotations of the Swiss currency in Poland. Currently, one franc costs PLN 4,58, while in September it was as much as PLN 4,86. This means that the installments of loans in Swiss francs paid by Poles have decreased by 3% over the last 6 months. In recent days, Polish borrowers have been focusing more on the latest court rulings regarding these loans than on tracking the franc exchange rate.

About the author

Pawel Majtkowski - analyst eToro on the Polish market, which shares its weekly commentary on the latest stock market information. Paweł is a recognized expert on financial markets with extensive experience as an analyst in financial institutions. He is also one of the most cited experts in the field of economy and financial markets in Poland. He graduated from law studies at the University of Warsaw. He is also the author of many publications in the field of investing, personal finance and economy.