Debt reduction
Here you can see what is the primary aim of a multi currency mortgage. Which is to reduce the balance of your mortgage.
In this example, the currency manager has expected a weakness in the US dollar, therefore has switched into the US dollar, the dollar has weakened and then the currency manager has expertly switched back. This has locked in a mortgage reduction of £23,810.
This is quite an extreme example but hopefully makes it clear how it works. In general most currency managers will aim to make a smaller reduction and history shows that switches take place up to 20 times per year. The currency manager will only switch if a strategy is in place and in some occasions may hold a position in Sterling, if they feel that this is best.
* performance fees to be applied
Interest savings
Here's an example of how you could calculate the interest chargeable ** during a nominal month. This highlights the interest savings that can be made. The figure is the average of all 4 currencies and assumes an equal split between them. All the interest
rates used are examples of possible interest rates charged.
** this does not include the lenders 'margin' which is typically between 1% and 1.5% or the currency managers performance fee.
