Concerned that poor currency exchange rates could mean you can’t afford to buy property or live in France? Don’t panic! These tips will help you save money when exchanging pounds and euros
What impact could currency exchange rates have on you?
If you are exchanging a large amount of money or making regular exchanges then even the smallest fluctuation in exchange rates can have a big impact.
For example: a French property on the market for €250,000 would have cost you around £190,839 if you bought it at an exchange rate of £1 = €1.31 (23 June) whereas if you bought it at an exchange rate of £1 = €1.16 (6 July) it would cost you around £215,517 – a significant difference of nearly £25,000 that could mean you can no longer afford it.
Use a specialist currency provider
It might be easy just to use your high street bank to exchange currency but this can be an expensive way to do it. Consider using a specialist currency broker instead – they don’t usually charge fees or commission and can offer you better exchange rates. If you regularly exchange currency or are exchanging a large sum then the higher commission or fees, as well as the poorer exchange rate, can add up to a significant amount. A currency exchange expert will also be able to talk you through the different options and might have suggestions on ways to save money. There are plenty of specialist currency brokers and some allow you to transact online, making the process quick and easy.
Fix your exchange rate in advance
Some currency brokers allow you to fix an exchange rate in advance with a forward contract. The advantage of this is that you know exactly how much your currency exchange is going to cost and so is useful for a large purchase (such as buying a property) and for regular payments (such as wages or a pension). Locking in an exchange rate means that you are protected from any drops in exchange rate however if the exchange rate improves you are unable to take advantage of it. Most people use these to eliminate the risk of currency markets in case a drop in the exchange rate means they are unable to afford that property purchase or pay the electricity bill. This doesn’t suit everyone though and you should discuss it carefully with a specialist before agreed to a forward contract.
Take out a mortgage for your French property purchase
One way shrewd property buyers are overcoming unfavourable exchange rates is to take out a French mortgage instead of purchasing a property outright. This means that they only pay a deposit (usually 15-20% of the property price) upfront which is affected by the exchange rate. If you take out a flexible mortgage then you can choose when to repay all or some of the mortgage when exchange rates move back in your favour.
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