If you are seeking new opportunities abroad and have identified the property of your dreams, it is useful to know how to save money in the foreign exchange markets. If a property must be purchased in a foreign currency, then the rate of exchange can be critical to the deal. If payments are made in stages, then it is even more important to get the best possible rates when dealing in foreign currencies as the cumulative effect of a series of poor deals could materially affect the cost effectiveness of your new property. If you have done the hard work in researching an area and picking the right spot it may be beneficial to follow up this work by using an FCA (Financial Conduct Authority) regulated currency specialist.
There are two main ways of exchanging currency when buying property overseas. If you require a spot rate this can be obtained through a regular high street bank but it is likely that a foreign exchange specialist would provide a better rate that equates to a saving of thousands of pounds.
Example – The Atkinsons from Norwich had agreed a price of USD500,000 for their dream home in Florida. Having agreed a rate of 1.26 per US dollar with their high street bank, the transaction was to cost GBP396,825. A last minute quote obtained from a foreign currency specialist, however, provided a more competitive rate of 1.29 per US dollar making the cost of the property GBP387,597. The overall saving of GBP9,228 went towards some new furniture and the Atkinsons were understandably left delighted with their decision to shop around.
If you are purchasing your property at a point in the future then it is possible to fix your exchange rates by agreeing a forward congtract which can be fixed up to one or two years in advance, depending on the provider. A forward contract can protect buyers against losses caused by fluctuating currencies. It can be demoralising to think that, when agreeing to purchase a property, the overall cost can vary from the price at the time of agreement. In some cases the swing can be so fundamental that it can make the purchase no longer viable for some people. Buyers entering into a transaction with a degree of certainty over the cost can proceed with confidence and make plans for the future. Whilst exchange rates can work for or against buyers, it can be a shrewd strategy to mitigate risk by using a forward contract.