Should you buy a yen mortgage?

A yen or foreign currency mortgage may look tempting - but the currency market is famously unpredictable, and stretched homeowners should tread carefully.

Stretched by the five interest rate rises that have hit your mortgage payments over the last year? Not to worry. Why not take advantage of lower rates abroad by switching to a foreign-currency mortgage? You could, for example, switch your debt out of pounds and into yen with the pleasing result that your monthly interest payments on a debt of £300,000 would fall from £1,500 a month to £250, says Myra Butterworth in The Daily Telegraph: rates in Japan are under 1%.

You'll also save money this month if you go for a mortgage in Swiss francs or euros. Tempting, isn't it? It shouldn't be. The currency market is famously unpredictable and by borrowing money in a foreign currency you're effectively betting that it will either stay stable against the pound or fall against the pound. But right now, with the pound at an 26-year high against the dollar, that's just not very likely. And let's not forget what happened the last time people rushed into yen mortgages: thanks to the weakening pound, the yen borrowers saw their mortgages (not their payments, their actual debt) double between 1992 and 1995. Not much of a deal after all.

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Merryn Somerset Webb

Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).

After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times

Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast -  but still writes for Moneyweek monthly. 

Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.