Croatian Government Fixes Swiss Franc Rate for 12 Months

The Croatian government has stepped in and put in a stop-gap measure to help out around 60,000 homeowners who were affected by the skyrocketing Swiss franc last week…

Prime Minister Zoran Milanović announced yesterday that those with mortgage loans tied to the Swiss franc could sleep easy.

“The Swiss franc will be fixed for one year at 6.39 kuna. What happened last week affected tens of thousands of families and they can now sleep easy tonight. They do not need to look at the exchange rate anymore. The decision was one the government saw as its duty to the nation,” said Milanović.

The Croatian Banking Association (HUB) initially proposed to freeze the exchange rate for 3 months, but the government opted for the longer term of 12 months. HUB President Zoran Bohaček says the association is not keen on waiting one year for a solution to be found.

To recap, Switzerland last week removed the cap on its Swiss Franc to the euro which saw the currency rise 17% against the Croatian kuna in 24 hours. The rise spelt bad news for the large number of homeowners with mortgage loans in the Swiss franc. Around 8% (60,000) of Croatian mortgage loans are in Swiss francs. One Swiss franc is currently 7.66 kuna.

Swiss franc loans were for a long time the best credit deal around and a large number of Croatians, Poles and Hungarians in particular took advantage of it in the early 2000s when the franc was weak and interest rates were lower than those for loans in local currencies.