Mar Bonnin-Palmer answers your questions around forward contracts and their popularity among property buyers
Can you tell me what a forward contract is?
A forward contract enables you to fix an exchange rate for a future payment, protecting your transaction from any market changes, so if the exchange rate drops, you still receive the rate you locked in at.
What are the advantages of using a forward contract when buying a property in France?
It’s easy to forget that exchange rates are constantly fluctuating and that these changes could affect the final price you pay for your property. By fixing the rate of exchange, you have the certainty of knowing exactly what you will be paying, so it’s a good tool for managing your budget.
A forward contract can also allow you to maximise your budget by taking advantage of a favourable movement in exchange rates. For example, let’s say that you find a property to buy in February for €250,000 and after signing the compromis de vente you pay the 10 per cent deposit on 21 February when the rate is 1.15. Completion is scheduled for May, however the exchange rate has climbed to 1.18 by 12 March and at that point, you decide to fi x the remainder of the purchase price – €225,000. By doing this and taking advantage of a rate movement, you could save thousands of pounds.
Do I need to pay the full amount when I fix the rate using a forward contract and how long can I fix it for?
You won’t need to pay the full amount until the contract comes to maturity, so it is a good tool for those with no access to the funds. However, you will need to pay 10 per cent of the full amount in advance at the time of fixing the rate. The exchange rate can be fixed for up to two years ahead of a payment.
If at the time of the payment the exchange rate has improved, could I buy currency at the higher rate?
Once you fix the exchange rate via a forward contract, you must transact at the rate agreed. If the rate has improved above the level fixed, you won’t be able to access that rate. Some products, such as FX Options, do allow this, but you need to seek guidance from a qualified dealer.
Are there any charges associated with a forward contract?
Moneycorp doesn’t impose any charges or extra commission on clients for taking a forward contract.
Could I fix the rate in advance for regular future payments, such as those for a Euro mortgage?
Yes, you could use moneycorp’s regular payment plan, which allows you to fi x the rate of exchange of regular payments for up to two years. Payments are automated and collected via direct debit, so not only do you have the certainty of the rate and the cost of every transaction, but you don’t need to worry about ordering an overseas transfer every month. It is also a good tool for repatriating a pension.
How do I find out whether a forward contract is right for me?
Moneycorp’s specialist advisors can offer you guidance. If you want to work with us, the first step is to open an account. Our expert team can talk you through the application process and help you every step of the way. You can manage your transactions online from our secure online platform, also available as a mobile app. If you register via FrenchEntrée, you get the benefit of no transfer fees for all your payments.
With a Platinum Trusted Service Award 2020 from independent review site Feefo and 40 years of experience in the industry, FrenchEntree has been recommending moneycorp for more than 15 years. During this time they have helped thousands of client planning the best way to pay for their property as well as supporting them afterwards with any further payment from paying bills, mortgages to repatriating UK pension payments for those who have retired to France.
Furthermore, we have worked with the same person at moneycorp for more than a decade! You might be familiar with her as she often writes for our FrenchEntree magazine. She has 13 years’ experience in foreign exchange, and is a qualified European lawyer with experience in European transactions. Mar will be happy to answer any questions or enquiries to support you through these difficult times
Opening an account is really easy and free of cost. You can register online or over the phone in a couple of minutes and for FrenchEntree there are no transfer fees in any payment.
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