How Much Do UK Lenders Discount Swiss Franc Income on a Mortgage?
- 5 days ago
- 15 min read
Find out why the discount applied to franc income varies so widely between lenders, and what that gap costs your borrowing power.
Quick Answer
UK lenders discount Swiss franc income by anywhere from 0 to 25 percent, not the flat 25 percent widely quoted. Most published criteria sit between 10 and 20 percent, some apply nothing, and several lenders refuse foreign currency income altogether. Which lender you approach decides the outcome.
The discount, usually called a haircut, is applied to your income after it has been converted into sterling, before affordability is calculated. It is not a cut to the loan you are offered and it is not an increase in the stress rate. Lenders also grade currencies, so the franc does not automatically sit in the most generous band.
Because the range is so wide, lender selection matters more here than almost anywhere else in expat lending. On an identical franc salary, the difference between the most and least generous published treatment can run to hundreds of thousands of pounds of borrowing capacity. Criteria change often, so the position at the point you apply is the one that counts.
Reviewed by Ben Stephenson, FCA authorised (FRN 496907) · 25+ years' experience · 4.9★ on Google. Updated: 6 August 2026.
Who Is This Guide For
Best for UK nationals working in Zurich, Basel or Geneva, cross-border commuters paid in francs, and returning expats keeping a Swiss contract, who need to know how much of their franc salary a UK lender counts before they choose where to apply.
Key Points
Published haircuts range from 0% to outright decline
The franc often sits in a 15% tier
The discount hits income, not your loan size
Table of Contents
The 25 percent haircut everyone quotes came from one lender in 2016
Where the franc sits when a lender grades currencies into tiers
The discount reduces your income, not your loan and not your stress rate
The contract route: a sterling floor instead of a percentage cut
CP26/18 proposes removing the conversion right, and nothing has changed yet
One Zurich salary, three lenders, and a gap just under £199,000
The pattern in Swiss-resident files: declined on the currency list, not on affordability
The 25 percent haircut everyone quotes came from one lender in 2016
If you are paid in Swiss francs and you have read anything at all about UK mortgages, you have met the 25 percent rule. Lenders convert your salary into sterling, the story goes, then cut a quarter off it before they assess what you can borrow. It is repeated so consistently across forums, comparison sites and broker blogs that it reads like a market standard.
It is not one. The only 25 percent figure we could trace to a verifiable source belongs to a single lender, and the reporting that documents it dates from July 2016. That same lender converted at fixed internal exchange rates rather than live market rates, and the franc rate it used then sits a long way from where the market has traded in 2026.
The honest picture is wider and considerably stranger. Among UK lenders that publish how they treat foreign currency income, the discount runs from 0 percent to 25 percent. The commonly repeated band of 10 to 25 percent is wrong at both ends: the floor is zero, not ten, and the worst outcome is not a 25 percent trim but a flat refusal to count the income at all.
That distinction matters more than it sounds. The haircut is not a levy the market imposes on franc earners. It is a lender-selection variable, and for a Swiss-resident applicant it is usually the single largest lever on borrowing capacity. Two lenders looking at the same payslip can land on maximum loans that differ by a six-figure sum before anything else about the case is examined.
Everything else in our expat mortgages work sits downstream of that one choice. Get the placement right and the haircut can be small or absent; get it wrong and an affordable purchase reads as unaffordable.
Zero percent at one end, a flat refusal at the other
At least one large high street bank publishes a plain statement that it uses the full converted income and applies no haircut whatsoever. The franc appears on its acceptable currency list. For a franc earner, that single fact breaks the standard advice, because the standard advice assumes a discount is unavoidable.
Be precise about what that zero means, though. It is a blanket policy across that lender's whole acceptable currency list, not special treatment for the franc, which benefits by being on the list rather than by being a hard currency.
A zero haircut is not the same as a soft assessment. The income still has to clear everything else the lender tests, and the exchange rate is struck on a particular day. It simply means the currency of your pay is not the thing reducing your number.
The lenders nobody counts in the range
At the other end sit lenders that never appear in the 10 to 25 percent conversation, because they apply no percentage at all. Their published criteria say that income received in a foreign currency is not acceptable, that they cannot accept any overseas or foreign currency income, or that residential lending requires contractual remuneration in sterling.
For someone paid in francs, that is an effective 100 percent discount. Your income is not trimmed, it is disregarded. Three separate lenders in this position were confirmed from their own published criteria, and that is the outcome a franc earner should actually plan around, rather than the folklore quarter.
Why do they take that view? The FCA's own consultation records stakeholders describing the foreign currency rules as overly disproportionate and operationally complex, with some lenders choosing not to accept foreign income as a result (FCA, 2026). Public guidance from 2017 said much the same about compliance cost after the March 2016 regulations (Armed Forces Covenant, 2017).
Between the zero and the refusal sits the bulk of the market. The modal published figure across 2025 and 2026 criteria is 10 to 20 percent, which is where most franc earners land in practice.
Where the franc sits when a lender grades currencies into tiers
Haircuts are not usually flat. Several lenders grade currencies, and one manual-underwriting building society publishes its full tier list, which is the clearest public evidence that the grading exists at all.
On that published list the US dollar and the euro attract 10 percent. The Swiss franc sits in the middle tier at 15 percent, alongside currencies including the Norwegian krone, Japanese yen, Hong Kong dollar, Singapore dollar, UAE dirham and Qatari riyal. The heaviest published tier, at 20 percent, holds the Canadian, Australian and New Zealand dollars, the Danish krone, the Swedish krona and the Bahraini dinar.
That undermines an assumption almost everyone brings to the subject: that safe-haven currencies attract the smallest discount. On this evidence it is only half true.
Published haircut tier | Currencies grouped in that tier |
10 percent | US dollar, euro |
15 percent | Swiss franc, Norwegian krone, Japanese yen, Hong Kong dollar, Singapore dollar, UAE dirham, Saudi riyal, Qatari riyal, Kuwaiti dinar, Omani rial, Chinese yuan |
20 percent | Canadian dollar, Australian dollar, New Zealand dollar, Danish krone, Swedish krona, Bahraini dinar |
The franc is the sixth most traded currency in the world, accounting for 6.4 percent of a global market turning over 9.6 trillion US dollars a day, and it climbed from eighth place in the previous survey (Bank for International Settlements, 2025). Yet it sits a tier behind the dollar and the euro on that list. At another lender it shares a 20 percent bucket with the Indian rupee.
The likeliest explanation is operational rather than economic. The dollar and the euro are the two currencies every UK treasury desk handles daily, so familiarity appears to drive the grading more than measured stability does. No lender we could identify rewards the franc for its stability record.
What the franc's actual record shows, and what it does not
There is a further wrinkle. For someone earning francs and holding a sterling mortgage, the risk a haircut is meant to cover is sterling strengthening against the franc, which would mean fewer pounds per franc. On Bank of England daily spot data from January 2014 to August 2026, the worst adverse five-year move for a franc earner was 5.3 percent, and the worst adverse one-year move was 14.0 percent (Bank of England, 2026).
Set that against haircuts of 15 to 25 percent and the discount looks conservative for this particular pair over this particular window. Be careful with that conclusion, though. The window contains the post-2016 sterling depreciation, which flatters the franc earner considerably, and past currency behaviour says nothing reliable about the next twenty-five years.
The fair statement is that the discount has historically been more conservative than the franc's own record required, not that a discount is unnecessary. A single two-day move in January 2015 saw sterling fall almost 17 percent against the franc.
The discount reduces your income, not your loan and not your stress rate
This is the point most content gets muddled, and it changes how you read every number here. The haircut is applied to your income, after conversion into sterling, before affordability is run. It is not a cut to the loan offered and not an uplift to the stress rate.
The sequence in published criteria is consistent. Convert the franc figure to sterling at the lender's chosen rate, apply the percentage reduction, then feed the reduced figure into the standard affordability calculation. Everything after that point works as it would for a UK-resident borrower.
Here is what that looks like in numbers. Take a Swiss-resident UK national on CHF 200,000 basic. At the Bank of England spot rate of 1.0877 francs to the pound on 4 August 2026, that converts to £183,874 (Bank of England, 2026).
Haircut applied after conversion | Income entering the affordability calculation |
0 percent | £183,874 |
10 percent | £165,487 |
15 percent | £156,293 |
20 percent | £147,099 |
25 percent | £137,906 |
Foreign currency income declined | Nothing counted |
Apply an illustrative income multiple of 4.5 times to those figures and the top of that table supports roughly £827,000 while the bottom supports roughly £621,000. The multiple is illustrative only and is not a claim about any particular lender. The spread of around £207,000 on identical income comes purely from the haircut, before any difference in multiples or stress testing.
Stress rate and pay rate are different things
Since the two are frequently confused, it is worth separating them. The pay rate is the interest rate on the product itself, the one that determines your monthly payment. The stress rate is a higher notional rate the lender uses to test whether you could still afford the payments if rates rose during the term.
Neither is the haircut. We found no evidence in published criteria of any UK lender applying a higher stress rate purely because income arrives in a foreign currency. Absence of evidence is not proof, so treat that as "not found in published criteria" rather than a rule.
One genuine variation does sit on the loan side. In the private bank market, currency mismatch is often reflected in a more conservative loan to value rather than an income discount. Published criteria are scarce there, so treat that as a market observation rather than a documented rule.
The contract route: a sterling floor instead of a percentage cut
Not every lender solves this problem with a percentage. One takes a completely different route, and it is worth understanding because it may fit a small number of Swiss employment arrangements very well.
That lender applies no haircut at all, but only accepts foreign currency income where the employment contract commits to a sterling-equivalent minimum, so the borrower is not exposed to exchange rate movement in the first place. The logic is clean. If the contract removes the currency risk, there is nothing for a discount to protect against.
The catch is obvious once you look at a typical Swiss employment contract. A standard Zurich or Basel package is denominated in francs with no sterling floor anywhere in it, so most applicants simply do not qualify for that route. It is a mechanism designed for a specific type of employer arrangement, not a general workaround.
Where it does appear, it tends to be in secondment agreements and contracts written by UK-headquartered employers posting staff abroad. If yours contains anything resembling a sterling-equivalent commitment, flag it early.
There is a related structural point that applies more broadly. Under the FCA Handbook, a sterling mortgage becomes a foreign currency loan because of the currency of the income or assets repaying it, not because of the currency the payment leaves in (FCA, 2026). If you have genuine sterling income or sterling assets covering the payments, the picture can look different, and that is one of the few structural routes out of the discount rather than around it.
Converting francs to sterling every month and paying from a UK account does not achieve the same thing. The rules look through to the source of repayment, so the classification, and the haircut, stay where they were.
CP26/18 proposes removing the conversion right, and nothing has changed yet
There is a live regulatory story here and it needs stating carefully. The rules that push some lenders away from foreign currency income sit in MCOB 2A.3 and 7A.4 of the FCA Handbook, onshored rather than repealed after Brexit and still in force as at August 2026 (FCA, 2026).
Under the current rules, a lender entering a foreign currency loan has to either give the borrower a right to convert into an alternative currency, or put other arrangements in place to limit exchange rate risk. Once the loan is running, it also has to warn the borrower where the balance or instalments vary by more than 20 percent from the position when the contract was concluded.
That 20 percent deserves a word of its own, because it is misread constantly. It is a post-completion warning trigger. It is not a haircut, not an affordability buffer and not a lending limit. The fact that several lenders independently settled on a 20 percent haircut is a coincidence of number, nothing more.
Now the proposal. FCA consultation paper CP26/18, published 9 June 2026, proposes removing the foreign currency conversion right that came in with the Mortgage Credit Directive, removing the mandatory 20 percent notification trigger, and distinguishing a sterling mortgage supported by foreign income from a genuinely non-sterling-denominated loan (FCA, 2026).
CP26/18 is a proposal. The consultation closed on 28 July 2026. Nothing has changed yet. A policy statement is expected later in 2026 and the paper gives no implementation date, so anything you read that describes the conversion right as already removed is ahead of the facts.
One practical consequence follows. Do not assume you have a conversion right: which route your lender took has to be disclosed in the mortgage contract, so check the contract rather than the marketing.
One further distinction is worth knowing. Some lenders serving expat borrowers are licensed in the Crown Dependencies rather than authorised by the FCA, which means these Handbook protections do not apply to their lending at all. That is a real difference in consumer protection and it is worth checking before you compare offers across our specialist lending panel.
One Zurich salary, three lenders, and a gap just under £199,000
Numbers land better than percentages. The following is an illustrative composite, not a real client, built to show the mechanism rather than to predict any lender's decision.
A UK national working as a pharmaceutical manager in Zurich earns CHF 240,000 basic, which converts to roughly £220,650 at the August 2026 spot rate used throughout this article. She has £220,000 in savings and is buying a £1.1m house in Surrey, needing an £880,000 loan at 80 percent loan to value. On an illustrative 4.5 times multiple, the zero-haircut lender assesses her on the full £220,650 and reaches around £992,900, the 15 percent tier lender assesses her on £187,550 and reaches around £844,000, and the 20 percent lender assesses her on £176,520 and reaches around £794,300. Only one of those three supports the purchase, and the gap between the most and least generous is just under £199,000 of borrowing capacity on the same payslip.
Her affordability was tested at a stress rate materially above the pay rate on the product she was quoted, as it would be for any borrower, and that stress test applied identically at all three lenders. So the stress rate is not where the difference came from. It came entirely from the currency her employer pays her in, and which list that currency appears on.
She was not a marginal case either. On the zero-haircut assessment she had comfortable headroom, yet the same file at the wrong lender reads as a decline on affordability, which is easily mistaken for not being able to afford the house.
The pattern in Swiss-resident files: declined on the currency list, not on affordability
The single most common thing we see in Swiss-resident enquiries is a borrower who has already been turned down, believes the decline was about affordability, and is now shopping for a cheaper house. In a good proportion of those files the affordability was never really the problem. The lender either does not hold the franc on its acceptable currency list, or holds it in its heaviest tier.
The second pattern is the self-inflicted 25 percent. People arrive having already discounted their own income by a quarter because that is the figure the internet gave them, then set a budget around the reduced number. They have effectively applied the least generous published treatment in the market to themselves before speaking to anyone.
The third is timing rather than criteria. Lenders strike the exchange rate at different points: the close on the date of application, the day of underwriter assessment, or fixed at decision in principle. On a pair that has moved as much as this one, a few weeks can matter.
A fourth surprises people most: confusing acceptance of the borrower with acceptance of the currency. Plenty of lenders are happy to lend to a Swiss resident, and may even use Swiss credit data, while refusing to count a franc salary. Accepting Swiss residents and accepting Swiss francs are different questions.
We also see confusion imported from mainland Europe, where franc-denominated mortgages caused real consumer harm. Research for the European Parliament records such loans reaching about 40 percent of some Polish banks' portfolios, with borrowers in some cases repaying close to twice what they borrowed (European Parliamentary Research Service, 2021). That is a franc-denominated loan, a different product from a sterling loan supported by franc income.
The response to all of it is the same. Establish which lenders hold the franc, at what tier, and when they strike the rate, before you set a budget. The comparison across our overseas income for expat applicants work is the same exercise we run for euro earners on the Germany and France side, where the published tiers happen to be more generous.
Be clear-eyed about the trade-off, too. The lenders most comfortable with franc income are not always the cheapest place to borrow, and a smaller haircut at a specialist lender can come with costs a high street product would not carry. Criteria also change frequently, so the positions described here are published positions at the time of writing rather than permanent features of the market.
FAQs
Is the haircut applied before or after my francs are converted into pounds?
After. Lenders convert your franc income into sterling at their chosen exchange rate first, then apply the percentage reduction to the sterling figure, and only then run affordability. The exchange rate a lender uses, and the day it strikes that rate, can matter almost as much as the haircut percentage itself.
Does paying my mortgage from a UK sterling account avoid the discount?
No. The FCA Handbook looks through to the currency of the income or assets your repayments actually come from, not the currency of the payment instruction (FCA, 2026). Converting francs to sterling each month and paying from a UK account leaves both the classification and the haircut unchanged, and leaves you carrying the monthly conversion cost.
Can my mortgage balance increase if the pound strengthens against the franc?
Not on a sterling-denominated UK mortgage. Your balance and your instalments are fixed in pounds and do not move when the exchange rate does. What changes is how many francs you need to earn to meet a fixed sterling payment, which is a real budgeting risk but a different thing from the balance itself growing.
Do lenders charge a higher stress rate because my income is in francs?
We found no evidence of that in published criteria. The stress rate is the higher notional rate used to test affordability against future rate rises, and it appears to be applied in the same way regardless of income currency. The currency effect shows up in the income figure that enters the calculation, not in the stress rate applied to it.
Is a bonus paid in francs discounted at the same rate as basic salary?
Not always, and the split can be counter-intuitive. At least one lender publishes a larger reduction on basic salary than on bonus income, which is the reverse of how variable pay is usually treated. Another allows full credit for allowances and overtime given a track record, so it is worth asking about each income component separately.
Summary
The discount on franc income is not a fixed market rule. Published treatment stretches from no reduction at all, through a common 10 to 20 percent band, to lenders that decline foreign currency income outright. The franc is also graded rather than treated on merit, often landing a tier below the dollar and euro. Because the spread is so wide, where you apply shapes the answer, and it is worth mapping that before you set a budget.
Updated: 6 August 2026
Written by Ben Stephenson, CeMAP-qualified Mortgage Broker.
Manor Mortgages Direct is FCA authorised, FRN 496907, has traded for 25 years, is highly positively reviewed, 4.9 rated on Google, and has helped thousands secure the right mortgage. Bristol-based mortgage brokers, assisting clients nationwide.
Sources
FCA Handbook (2026) - MCOB 2A.3 Foreign currency loans - https://www.handbook.fca.org.uk/handbook/MCOB/2A/3.html - accessed 6 August 2026
FCA Handbook (2026) - MCOB 7A.4 Foreign currency loans and significant exchange rate movement disclosure - https://www.handbook.fca.org.uk/handbook/MCOB/7A/4.html - accessed 6 August 2026
FCA Handbook Glossary (2026) - definition of foreign currency loan - https://www.handbook.fca.org.uk/handbook/glossary/G3501.html - accessed 6 August 2026
Financial Conduct Authority (2026) - CP26/18 Mortgage Rule Review, published 9 June 2026, consultation closed 28 July 2026 - https://www.fca.org.uk/publications/consultation-papers/cp26-18-mortgage-rule-review-responsible-lending - accessed 6 August 2026
Bank of England (2026) - Statistical Interactive Database, Swiss Franc into Sterling spot rate, series XUDLSFS - https://www.bankofengland.co.uk/boeapps/database/ - accessed 6 August 2026
Bank for International Settlements (2025) - Triennial Central Bank Survey, OTC foreign exchange turnover in April 2025 - https://www.bis.org/statistics/rpfx25_fx.htm - accessed 6 August 2026
European Parliamentary Research Service (2021) - Unfair terms in Swiss franc loans, briefing PE 689.361 - https://www.europarl.europa.eu/RegData/etudes/BRIE/2021/689361/EPRS_BRI(2021)689361_EN.pdf - accessed 6 August 2026
Armed Forces Covenant (2017) - Buying a UK property if you need to rely on income that is not sterling - https://www.armedforcescovenant.gov.uk/wp-content/uploads/2016/02/20170525_-Buying-a-UK-property-if-you-need-to-rely-on-income-that-is-not....pdf - accessed 6 August 2026
Related Guides