Mar Bonnin-Palmer answers your questions about Interbank exchange rates, and reducing risk when it comes to volatile currency markets.
Mar Bonnin-Palmer is Senior Key Account Manager at Moneycorp, the foreign exchange expert and specialist in currency transfers for overseas property.
Q1: What is an ‘Interbank’ rate?
When you search online for the current exchange rate, it’s likely that your search engine will provide the interbank rate, also known as the market rate. This is the official conversion rate for any given currency pair, and it fluctuates constantly. Currency providers and high street banks add a margin to these live rates for the delivery of their services. This is known as a commercial rate, which differs slightly from the interbank rate. You can take the interbank rate as a rough indicative of where things are, however you will need to speak to a provider to get a live and accurate commercial rate.
Q2: How to mitigate the volatility of the pound when buying a house on a tight budget
I’m looking to buy a house in France on a fairly tight budget so every penny counts. What can I do to mitigate the volatility of the pound in these uncertain times?
It helps to understand the market, how the process of currency exchange works and what your budget and manage your expectations. A specialist can also make you aware of any scheduled events in the short term that could substantially vary the rate.
Once you know the situation, you can consider both the expected range of where the rate is most likely to be and at what point you will feel comfortable within that range.
With the support and guidance of a currency exchange expert, you can use free currency exchange tools to target the highest available rate within your range and protect yourself against any sudden drops in the value of the pound.
Q3: How to secure a fixed price agreement?
How can I make sure that the purchase price I have agreed would not be affected by the exchange rate volatility?
You can decide to lock in a prevailing exchange rate in advance of your payment using a forward contract. (Please note a forward contract may require a deposit.)
This tool is very useful for those who want to take advantage of favourable movements on the rate but also for those who want to have certainty or peace of mind of knowing how much would the property cost them.
You need to be aware that forward contracts don’t come at a cost but as well as a deposit you also need to bear in mind that once the rate is fixed within your forward contract, you cannot change it, even if the rate moves in your favour.
Q4: How to ensure my mortgage doesn’t increase substantially?
I have just bought a property with the help of a French mortgage. I am concerned that if the exchange rate changes substantially, my mortgage might become very expensive. Is there anything I can do?
If you are worried that the fluctuation might drastically change your monthly payments, you can decide to fix the exchange rate for your future mortgage cost.
The Regular Payment Plan (RPP) allows you to fix the amount of currency received, the sterling debited, or both if you choose to fix the exchange rate for your regular payments so you’ll know exactly how much the mortgage will cost you.
You can fix these payments for up to two years, saving you time and offering certainty that any required payments will be sent and received according to the frequency you specify. This includes monthly, quarterly and annual payments as well as other intervals.
Ready to buy a property in France?
Having the tools to master market volatility, are you ready to start a new life in France? Read our Beginner’s Guide to Buying French Property, visit our Property Listings to find your dream home, and use our Buying a Property in France Checklist to ensure you are fully prepared for your French property purchase.
FrenchEntrée’s trusted partners at Moneycorp have more than 40 years’ experience helping customers get the best value on their international transfers. Best of all, if you sign up through FrenchEntrée, you can benefit from our exclusive offer including free international money transfers for life.
Lead photo credit : © Pixabay at Pexels
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