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How do currency movements affect buyers of overseas holiday homes?

How do currency movements affect buyers of overseas holiday homes?
Published:   12 Dec at 9 AM

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Despite the recent economic turmoil in the UK we have seen an incredible rise in the amount of people moving abroad in order to make the most of their better educational set-ups, better job opportunities and even their better economy in general. Most people, when contemplating purchasing a house, often forget about the effect that the exchange rate can have on their purchase price. Particularly since the GBP has dropped greatly in the last year in relation to the Euro, exchange rates have become an important consideration when transferring larger sums abroad, particularly when buying a property overseas.

Regardless of whether you're paying in cash for a property or looking to take out a mortgage from an international bank in the relevant currency, you will need to transfer your GBP into the currency you will be paying the mortgage in. So the way in which you complete the transfer of the currency could significantly effect the amount you would be paying in the end and obviously on the opposite end of the scale, can help you get a good deal on your property and essentially allow you to make a good profit on the property.

The key to getting a good deal on the currency is to familiarise yourself with the market and keep an eye on it, allowing you to make exchange rates work for you can provide great profits. Some of the best ways of ensuring that you get a good deal include the following.

The first is to identify your budget for your property. It may seem a very obvious task but it is important to take into account ALL the costs involved in purchasing this property as the price of the property can differ greatly from the eventual cost of purchasing it. When converting big amounts of money from GBP to any foreign currency, the current exchange rate will essentially determine the total amount you will pay for the property before additional fees are added in. For example, last August a house on the market in Spain with an asking price of €250,000 would have cost you £194,850. However, by the beginning of September that price would have gone up to £204,580.That's an increase of £9,730 in a matter of weeks simply because of a fluctuation in the value of the pound against anothercurrency– in this case, the euro.

Another key point is to ensure that you keep up with currency exchange rate fluctuations. Even small differentials in exchange rates can make a huge difference to the amounts concerned. Even a small increase of 1% on a £100,000 fee is £1000. This is a lot of money in it's self but when you think that many transfers even on a personal level top £1million, the increase (or decrease) can often be o£10,000. So during the course of a day, exchange rates are constantly going up and down. That could have major repercussions for you if you're on a tight sterling budget. So, don't leave your foreign exchange transactions to the last minute. It could leave you exposed to the prevailing exchange rate and you may not have adequate funds to meet payments on the due dates for example. This could lead you to being liable for penalty payments or you may lose your property abroad altogether. The good news is however, you can protect yourself against negative currency exchange rate fluctuations.

« Exchange Rates - What are they and how are they calculated?