The main advantage of foreign currency mortgages is simple: They give you the opportunity to borrow money at a lower rate of interest than is possible in the UK. This can be achieved by choosing a country that has lower lending rates of interest than we have in the UK.

A £150,000 loan repaid over 25 years at 6.75 percent would give you monthly repayments of approximately £1,050. If you borrowed the same mortgage in Japanese Yen, for instance, at a rate of 2 percent, then your monthly repayments would be around £650. This would be a staggering monthly saving of £400!

If the currency markets work in your favour, then there is scope for further savings to arise from favourable in the exchange rate. If the pound climbs in value against the currency in which you took the loan, then you will need to spend fewer pounds to buy the same amount of foreign currency you initially borrowed. This means that in real terms, your mortgage has actually decreased and your monthly repayments will be lower in pounds Sterling. Alternatively, if there is provision to do so in the terms of the mortgage, then it would be possible to maintain the level of the repayments and clear the debt early with a lower total interest bill.

Given the volatility of the foreign exchange markets, these fluctuations can be quite sizeable. At one point in 2000, the Euro had declined almost ten percent against Sterling in less than a year, meaning tens of thousands of pounds knocked off the total repayment bill for any lucky British residents who had earlier taken out a Euro mortgage.

Given the increasing propensity of companies to spread their operations across Europe, many workers in this country find themselves being paid in Euros and hold Euro-denominated bank accounts. It can therefore be convenient to have a mortgage that is also in Euros, as this would stop them having to pay bank charges for converting their Euros to pounds Sterling in order to pay their mortgage. Someone who is paid in Euros does not enjoy the same potential for currency exchange gains with a purely Euro mortgage as someone whose main currency is Sterling, but nor are they exposed to the risks mentioned below.

A final advantage - and one that will not necessarily appeal to all borrowers - is that continental lenders often lend on much longer fixed terms than UK mortgage companies. The average length of a fixed period can be anything from five to fifteen years in France and mortgages can be found with fixed periods lasting as long as twenty years in Germany. This gives you the security of having a rigidly fixed long-term budget and knowledge of your repayment as far into the future as you could realistically need to.