Whether you are purchasing a French property, own a second home, or have income or assets in a non-Euro currency—getting the best rates on currency exchange in France should be one of your top priorities.
This beginner’s guide covers everything you need to know about currency exchange in France. How can you get the best exchange rates and protect against currency fluctuations? What are spot and forward contracts, how do you ‘fix the exchange rate’, and what are your options for recurring payments?
Use this guide to get a comprehensive overview of the currency exchange process, then follow the links for more information on each stage.
Why is Foreign Currency Exchange So Important?
If your income or assets are in a different currency to the Euro, at some point, you are going to have to exchange that currency into Euros. For anyone who has ever travelled to a foreign country, this is nothing new. In fact, maybe you’ve already reaped the benefits of a high exchange rate shopping in a foreign country or lamented the fact that “everything’s so expensive” in a destination with a stronger currency!
Perhaps you did your research before you went on vacation and found the best high-street exchange rate or arranged for a prepaid card to avoid additional charges. But you probably didn’t spend too long worrying about currency fluctuations or tracking market rates in the run-up to your 2-week break in St Tropez.
When you’re dealing with large purchases, such as buying a property in France or making regular payments overseas, these market rates and fluctuations suddenly become a big deal. Losing a few pounds or dollars off your spending money probably isn’t going to ruin your holiday, but making the same mistakes on a property purchase is a whole other matter.
Failing to lock in an exchange rate or buying at a time when the exchange rate is working against you could make a difference of thousands. It could even make the difference between being able to afford your dream property or not, or mean that you can no longer afford to pay your monthly mortgage payments.
Thankfully, there are steps you can take to protect against these worst-case scenarios and there are also ways to make the system work for you. With careful planning and preparation (and a little bit of luck!), you might even be able to make savings on your property purchase.
By the end of this guide, you’ll have all the information you need to make the best choice for you and your money.
How Currency Exchange Rates Work
Let’s start at the beginning and take a look at how currency exchange and exchange rates work.
Foreign currency exchange (Forex or FX) is a global market of banks, brokers, traders, and trading institutions that exchange national currencies across an international electronic network. It’s this FX market that determines the value of each national currency against another and therefore the amount of one currency you can purchase with another, i.e. the currency exchange rate.
For French property buyers and owners, the most important foreign exchange rates to take note of will be those between your home currency (the country in which you receive your income or hold the majority of your assets) and France (i.e. the Euro).
Exchange rates are listed in currency pairs, where the first listed currency (in this case, the EUR) is the base currency and the second (the US dollar) is the quote currency.
For example, a rate of EUR/USD = 1.2500 indicates that 1 Euro can be purchased for 1.25 US Dollars.
If the rate were to increase to EUR/USD = 1.500 that would mean the Euro increases in strength against the Dollar, while the Dollar weakens against the Euro (i.e. you now need more dollars to purchase that same 1 Euro).
*NB: these are only example currency rates, they are not reflective of current market values.
How Currency Rates Affect French Property Buyers and Owners
The Forex market is trading 24 hours a day, five days a week (from Sunday 5pm EST to Friday 4pm EST to be exact), and during this time these values and rates are constantly changing. This means that the amount of Euros you will be able to purchase when you exchange your domestic currency is constantly changing too.
Sometimes these changes are small and relatively insignificant to buyers, while on rare occasions they can be catastrophic. And if you are exchanging large amounts, even a difference of 1% can be quite significant.
To take the above examples:
With a rate of EUR/USD = 1.2500 (and not accounting for any commissions or transfer fees)
If you were to purchase €10 at this exchange rate, it would cost you US$12.50.
If you were to purchase €100 at this exchange rate, it would cost you US$125.00.
With a rate of EUR/USD = 1.5000 (and not accounting for any commissions or transfer fees)
If you were to purchase €10 at this exchange rate, it would cost you US$15.00.
If you were to purchase €100 at this exchange rate, it would cost you US$150.00.
Now, if you could choose, it’s pretty obvious which rate you would go with, but if you were only exchanging €10, you might not be too upset over your €2.50 loss. But what would this mean on a larger purchase?
Working out the real cost of your French property
For foreign buyers looking to buy property in France, it’s important to recognise that the actual cost of the property will always be determined by the exchange rate you receive. Consequently, your budget will also be determined by the rate you exchange at.
Using those same rates:
If you were to purchase a French property at €200,000 and the exchange rate was EUR/USD = 1.2500, the actual cost would be US$250,000
If you were to purchase a French property at €200,000 and the exchange rate was EUR/USD = 1.500, the actual cost would be US$300,000
That same property just cost you an extra $50,000 because the exchange rate changed!
It’s also important to remember that the figures you will see quoted on financial reports and on currency conversion websites such as XE.com refer to the market rate or interbank rate. This is the best possible currency exchange rate, available only to select banks and trading institutions trading on the global FX market.
Following these rates is important because they tell you what the market is doing and how strong your currency is against the Euro (the stronger it is, the better rate of exchange you’ll get). However, this won’t be the actual exchange rate you will receive when you change your money.
Don’t make the mistake of thinking that if the market rate is EUR/USD = 1.2500 that you will be able to purchase at this rate. The commercial exchange rate offered by banks and currency exchange specialists always includes a mark-up, so the actual exchange rate you will receive will be the market rate + the mark-up. There will also typically be transfer fees or charges added to your currency exchange transaction.
These mark-ups vary considerably between banks, exchange houses, and currency exchange specialists, which is why you will see many different exchange rates offered across the commercial market at any one time. Fees and charges can also vary greatly, and the rates and fees you pay may also be affected by the amount you have to transfer, when you transfer it, and the type of contract you use. This is why it’s so important to make an educated choice about where you exchange your money as well as when.
If all this sounds complicated, think of it like this: the figure you need to be most concerned with is the amount you will pay in your domestic currency (including all fees and charges) for the desired amount in Euros.
So, if you need to make a payment of €25,000 for a deposit on a property, how much will you pay the bank or currency exchange specialist in US$, £, or AU$ (or other currency)? This will be the actual cost of the payment.
Tracking Currency Exchange Rate Fluctuations
Now we’ve established the importance of securing the best possible exchange rate, the next question is how. We’ll talk about where to find the best exchange rates in a moment, but let’s first look at when the best time is to transfer funds. The obvious answer is to keep an eye on the currency exchange rates and transfer your money when your currency is at its strongest. But of course, it’s not quite that easy!
Holding off on transferring money when exchange rates are historically low might be a smart move, as is deciding to make the most of a good rate and make a large transfer. But waiting too long in the hope that the rates will move in your favour can be risky.
There are many different factors that can affect exchange rates, including economic data and predictions, government debt, national interest rates, recession, national and international political situations or policy changes, and the perceived stability or instability of a currency. They may even be affected by unforeseen events such as a natural disaster or a pandemic that impacts the economy.
The Forex market is so vast and complex that even expert currency advisors can often miss the mark or get caught out by unforeseen events. That doesn’t mean you shouldn’t listen to the experts or follow currency news, but it does mean you should never rely too heavily on predictions.
Ultimately, the best time for you to buy will depend largely on three factors: your budget, your timeline, and the market conditions. The smartest decision is the one that works for you, taking into account these factors. There’s no point holding out on a better exchange rate in order to save £2,000 if that means missing out on your dream property while you wait! Similarly, if you’re just looking and not planning to buy until next year, there would be little point in exchanging your money straight away, unless there was a historically high exchange rate that was unlikely to ever come up again.
It’s highly recommended to consult a foreign exchange expert who can weigh up the risk vs. reward for your individual financial situation and advise you how best to proceed.
In the meantime, keep an eye on the exchange rates and stay up-to-date on the latest trends and developments. Check out the latest posts in our Currency Zone for currency reports and FAQs from our partners at Moneycorp. You could also set up currency alerts or track a rate with your foreign currency exchange account (more about this in a minute).
Read our article Money Transfers to France: 5 Ways to Get the Best Exchange Rate
Exchanging Currency: Banks vs. Currency Exchange Specialists
Now, let’s take a look at where to transfer your money. When transferring large sums of money or setting up monthly transfers, you can’t just pop into your Bureau de Change and hand over the cash! Instead, you will need to arrange to transfer funds through either a bank or a currency exchange specialist.
Generally speaking, high-street banks tend to offer less competitive rates and charge higher fees, although this is not always the case. Some banks charge fees per transaction (which can be quite high) and there are sometimes hidden fees and charges that aren’t immediately obvious. Be sure to check exactly what you have to pay, before agreeing to the exchange.
A second option is to use a currency exchange specialist. These specialists may offer more competitive rates and typically charge lower fixed fees, as well as providing a range of different services. The reason for this is in the name—being as they specialise in currency exchange and make large purchases of foreign currencies, they benefit from the best rates and savings that they can pass onto you.
The Benefits of Using a Currency Broker
There are many benefits to setting up a foreign currency account with a currency exchange specialist such as FrenchEntrée’s trusted partner, Moneycorp.
Better exchange rates
Price comparisons often show that brokers offer a 3-4% saving against the high-street banks. On larger purchases that equates to thousands in potential savings.
Planning and flexibility
Currency brokers offer products such as forward contracts that allow you to fix the exchange rate, or services such as rate tracking to ensure you seize the moment when rates are most favourable. They also have competitive options for long-term payment plans.
Expertise and guidance
Currency specialists live and breathe foreign currency exchange. That means they know the market inside out and have likely dealt with many foreign buyers, expats, and second-home owners in a similar position to you. As a customer, you’ll benefit from personal support and guidance on when to buy, when to wait, and how best to plan for future payments.
Speed and convenience
Currency specialists often use the latest technology, allowing you to make transfers at the click of a button. With everything available online (or via a quick telephone call), you can organise your transfers wherever you are in the world. While some banks do have similar transfer options available, making a regular overseas transfer from your personal bank account is likely to take far longer.
Security and peace of mind
Opting for a currency exchange specialist such as Moneycorp means you can be sure that your money is in safe hands. Being regulated by the Financial Conduct Authority (FCA) means they are required to safeguard customer funds held overnight (or longer) into segregated client accounts.
Read our article on Using a French Currency Broker: Save Money on Euro Transfers
Exchanging Your Currency: Advance Planning
Planning ahead is the key to securing the best rate on your currency exchange transactions. You might not be able to control the exchange rates or have a crystal ball to predict the future, but there are ways to ‘fix the exchange rate’ and protect yourself against fluctuations. Here are some of the currency exchange options you might want to make use of.
A spot contract is the current market price for changing one currency directly for another for immediate delivery, as opposed to a date in the future. This is the best way to seize the opportunity when exchange rates swing in your favour and your transfer will be made immediately.
Relying on a spot contract for a property purchase could be risky, however, as you’ll be tied to the current rate when you need to make your transfer.
Rate Tracking and Market Orders
If you have a more flexible timeline, a smart choice is to set up a market order to track a rate. You decide the exchange rate you would be happy with and when the rate is reached, your funds will be automatically purchased for you, ensuring you don’t miss out.
Forward contracts allow you to take advantage of a favourable exchange by ‘fixing the exchange rate’ for a future exchange. You put down a deposit and the agreed-upon rate will be kept for up to two years (depending on the length of the contract). Whenever you are ready to make your transfer within that timeframe, you will benefit from that original rate.
This is a popular choice for property buyers as it provides a fixed amount for your property budget and alleviates the worry of fluctuating exchange rates. You could take advantage of a strong exchange rate at the beginning of your property hunting journey or take out a forward contract once you’ve found your property to ensure the price is fixed during the months of finalising the sale.
Don’t be too quick to take out a forward contract though—remember you will be tied to the chosen rate even if the current exchange rate is even better!
Read our article on Transferring money to France- Spot and Forward Contracts
Regular Payment Plans
Regular payment plans are ideal if you have monthly bills or mortgage repayments to pay, or are receiving income or a pension from overseas. Making automatic transfers takes all the hassle out of making payments and there are also options to fix the exchange rate for extra security over the payment amounts.
Read our article on International Payments to France- Regular Payment plans
Ready to Send Money to France?
Whether you’re searching for your dream French property or planning a move to France, it’s never too early to start thinking about currency exchange. 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.
Set up a free foreign currency account today, benefit from expert advice from foreign exchange specialists, and stay up-to-date with live currency updates. Once you’re ready to pay your deposit or transfer funds, you can set up your payment online, via the app or over the phone, and they’ll take care of the rest.
Disclaimer: This guide is provided for general information purposes only and is not intended to be a substitute for professional advice regarding any aspect of purchasing a French property or French currency exchange. If in doubt you should consult your currency exchange specialist. FrenchEntrée cannot be held responsible for the consequences of decisions or actions you may choose to take in connections with a property purchase or international money transfer.
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