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Currency management.

WHEN AND HOW DO I EXCHANGE MY POUNDS TO EUROS?

If you are looking to exchange large sums of money from pounds into euros over a broad timescale, as you would when buying your overseas property think about ways to get the best deal and protect your money against exchange rate fluctuations.

It is strange to find that purchasers of property in France are always keen to negotiate a good price on the house of their dreams, but then fail to appreciate that great savings can be made by ensuring that they receive the best exchange rate from £ into Euros.

We tend to shop around for most things in life, but when it comes to currency, most people simply head straight for the bank. Mistake ! Banks do not offer you the best currency rate options.

There are two ways of securing yourself the best exchange rate within your timescale:

1) Buying Spot – The Spot Contract is the most basic and popular foreign exchange product. It is an agreement to buy or sell one currency in exchange for another. You have 2 days to settle the contract, at a price based on the prevailing "spot exchange rate" the current value of one currency compared to another.
Although the spot market lets you buy or sell currency as you need it, spot exchange rate movements are highly unpredictable, even during a single trading day. Upon receipt of cleared funds currency is available for onward transmission.
Or you may feel that you would like to leave what money you have in your domestic account to accumulate interest and only change your money just before the signing of contracts- this can be risky, however, as the Euro and pound fluctuate in value leaving the final price in pounds uncertain.

2) The forward contract - A Forward Contract lets you buy or sell one currency against another, for settlement no later than on the day the contract expires. Unlike spot contracts, a forward contract eliminates the risk of fluctuating exchange rates by locking in a price today for a transaction that will take place in the future (up to a maximum of 2 years). A 10% deposit is required to secure the contract and is payable within two working days with settlement due on the day the contract expires.
This option gives you peace of mind as you know exactly what you will be paying for your villa or apartment overseas, so that you can budget your finances without any nasty surprises. Hence it is especially useful when buying properties off-plan with 3 or 4 stage payments of 18 months so you don’t end up going over budget. Also, because you don’t have to pay for the Euros until the maturity date it frees up any money you have and gives you some time to arrange the finance. All you will have to pay is a 10% deposit of the amount you wish to buy with the balance due on maturity of the contract.

This forward contract is also useful if you receive a pension in pound sterling but live overseas. In this case you may want to be sure what your monthly income will be up to two years in advance so that you plan your finances. Also, if a French mortgage is paid for out of a pound sterling bank account you can ensure that the monthly outgoings are the same each month by entering into a forward contract.

If you can afford to take the risk and speculate on the foreign exchange market in the hope of paying a lower price for your property then it may simply be best to buy the Euros spot as and when you need them but for most people the second option makes more sense.

WHO DO YOU USE?

You have two options: either use a regular bank which you are comfortable with which may not always offer the best deals or speak to a recommended currency specialist who focuses on currency transfers and could well offer you better rates of exchange and more efficient & personal service.

Either way, your money is precious and like most people what you really need is piece of mind and to leave the risk taking to the professionals.

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