By law, all property transactions in France have to take place in euros – even if it happens to be a British client buying from a British seller, which we have seen many times. So if you are buying in France and you are holding funds in any currency other than the euro, it is essential that you take into consideration the exchange rates and their volatility when managing your budget.
If you’ve read our previous articles you will have seen that exchange rates have been in flux during this time with political tensions, economic uncertainties and the returning talk of Brexit. If we specifically take a look at Sterling-Euro, a month before lockdown £1 was equivalent to £1.20 (18 February) whereas now £1 gives you only £1.11 (24 August). If you were looking to buy a property in France with a €250,000 budget, it will now cost you an extra £17,000!
The volatility on the exchange rates can in fact pose a big risk to your budget and therefore it is important to account for it from the very beginning. However fluctuations can also present an opportunity to improve your budget if the rate movement is in the right direction. If that happens, being able to act quickly to take advantage of that movement is key.
Exchange rate movements can happen quickly and last for a short period – even seconds!- so if you want to monitor the market to manage your budget you need to be ready for it.
What can you do to be ready?
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 and before you travel to France to view properties. 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.
If you find a property you can consult the rates straight away and as soon as the initial contract is signed you can plan the best way to manage the process until completion which could take a couple of months.
At this stage some clients decide to fix the whole budget via a forward contract as we explained in previous articles however others –optimistic on the direction the market is taking- might 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 s market order with a stop limit order that allows you to protect your transaction to go below certain rate. This orders could be handy for those property buyers that 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 plus she is a qualified European lawyer with experience in European transactions. Mar will be happy to answer any questions or enquiries to support you through this difficult times
Opening an account is really easy and free of cost or obligation. You can register online or over the phone in a couple of minutes and for FrenchEntree there are no charges in any payment.
In order to understand the real importance of the foreign exchange element in the price of your property it is worth it to have a look at how the GBP/EUR have been fluctuating this year.