Feet below zero! Will franc borrowers pay lower installments?

The Good Finance Bank (GFB) introduced negative interest rates (- 0.25%) in December 2014. The Swiss wanted to reduce the profitability of investing in their native currency. In this way they decided to support the low franc exchange rate so that the export of local producers would be profitable.

Bank’s strategy and records in the loan agreement


Will negative rates in Switzerland save about 700,000? Polish borrowers who took out mortgages in the currency of Helveti? Experts believe that at least for some of the debtors in franc, GFB’s decision may soon mean lower installments. It all depends on the bank’s strategy and records in the loan agreement.

Honor negative rates 


Some banks will most likely honor negative rates and simply add to the contract margin. However, it is worth remembering that in most cases Polish banks did not foresee the situation in which interest rates fall below zero (a few years ago it was difficult to imagine it). Therefore, it may happen that the bank calculates the installment amount according to zero percent plus margin. It is possible that in such cases clients will demand that negative rates be taken into account even in court – in collective actions.

It is worth remembering, however, that interest rates on loans in franc depend not directly on the level of GFB rates, but on the market GFIC rate. Even if the latter is negative, banks may not include this in the calculation of installments.

Negative rates in Switzerland, even if they last long (which is not certain) will not be a decisive factor in the cost of the franc loan. The most important is the high franc exchange rate, which significantly increased the amount to be repaid (in USD.

Increase in the currency exchange rate


Fortunately, the Swiss in a recent referendum spoke strongly against the initiative to increase gold reserves. Poles with franc loans do not have to worry about an additional, sudden increase in the currency exchange rate.


Dennis Ochoa