Moneycorp explains your options when it comes to managing currency fluctuations and timing this with paying for your property in France.
Whilst this year we have not seen the extreme fluctuations in exchange rates that we saw in 2020 when the pandemic started, we are still seeing some interesting movements which are worth keeping an eye on.
Let’s take as a reference the pound against the euro. We have seen this major currency pair move frequently in the range of a low of 1.10 at the beginning of the year to the recent levels reaching 1.19 in October. In general the pound has been keeping strong against the European currency and whilst this week there has been a slight drop, there are hopes that it might bounce back or even come closer to that really desired 1.20 level.
Interest rates are currently the main drive for the pound and this week is key. The Bank of England is meeting on Thursday and the outcome will be crucial. If an interest rate rise is on the cards, that could be really supportive for the pound and a new higher level for the pair could be achieved.
So, how can you keep vigilant and take advantage of a potential positive rate move?
If you haven’t done so yet, you should get in touch with a foreign exchange specialist like moneycorp and open an account early in the process. Opening an account doesn’t involve any cost or obligation but will give you access to free expert guidance and currency tools to monitor the market and your budget.
Once you decide to go ahead with your purchase you would need to pay a deposit –usually 5 or 10%- and it is then a perfect opportunity to look at the market and get some guidance. Completion normally happens 2-3 months after the “compromise de vente” is signed and that gap poses a risk and also an opportunity for your transaction.
Some buyers decide to fix the whole budget at this point especially if the rate is at a good level through a forward contract. This gives buyers the certainty of knowing how much is that property going to cost them. Locking the rate ahead of completion locks the price and protects it from any negative fluctuations. However be aware that if the rate improves after you have lock it you cannot take advantage of the new improved rate.
On the other hand, some buyers are in a position to afford some risk or are optimistic on the direction the market is taking. They believe that the rate might improve in which case they can decide to target a better rate of exchange though a market order.
What shall I consider when placing a market order?
- With a market order you agree with your dealer a rate of exchange –higher than the current market one- and if such rate is achieved your order is automatically fulfilled and your Euros are bought at that price.
- The advantage of a market order is that it allows you to take advantage of a rate movement even if this happens quickly, briefly or whilst we are not at the office.
- Once the order is fulfilled you won’t be able to change it. This means that if the rate moves even higher after your level has been reached you won’t be able to change it.
You can combine a market order with a stop limit order that allows you to protect your transaction to go below certain rate. These tools are really handy for those property buyers who have calculated their price taking into account a range below which the purchase price might become unaffordable or too costly.
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.
Lead photo credit : Exchange rate currency (C) Ibrahim Boran, Unsplash
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