Interest Rates: How interest rates can affect your property price when buying in France

Interest Rates: How interest rates can affect your property price when buying in France

The foreign currency market is a key factor to consider when purchasing a property abroad. But what effects the rates?… Well, in fact there are a multitude of things that affect the rates. From partygate in political parties to global conflicts and energy crisis to retail sales, the markets are constantly changing by the second and move dependent of the thousands of factors.

The current topic of the month is interest rates. How interesting! Yet, very important none the less…

As we saw last week, the pound hit a 2 year low against the Euro, falling to 1.147 (15th June) compared to a 1.17 (9th June) the week before. But what caused this you may wonder.

In this instance, the Bank of England announced their interest rate hikes in their monthly meeting. This was slightly lower than expected at 1.25%. Markets were expecting a higher increase and so as a result, the Pound fell against its counterparts.


How does this affect your budget?

As an example, for a buyer looking to purchase a property for $300,000, it would cost them a £254,885 at the rate of 1.177. At the rate of 1.147, this would have cost 261,555. In the space of 6 days, your price has increased by £6,600.

If you are a buyer who is working with a tight budget, £6,600 can be the difference of not being able to afford your property.


How can you prevent this from happening?

Fortunately, there are tools available to you to prevent your budget from being affected by a drop like this.

Using a currency specialist opens the door to a multitude of options for you. You have access to a competitive rate of exchange and the expertise of a currency specialist whose role is to help you plan your transfer to make the most of your money.

Here are an example of a few of the tools available to you and how they can benefit your exchange:

  • Spot contract– A spot contract is an agreement between you your FX provider to exchange money and buy foreign currency at the present exchange rate. This is the most common and traditional form of currency exchange and is suited to addressing any imminent currency transfer needs you may be.
  • Market order– you could target a rate of exchange and if that rate is then hit, we could either buy the funds for you automatically, or notify you for your permission to buy. With the same principle we can set up a limit order to protect your transaction in case the rate falls below a certain level. This suits those who have some time on their hands and are optimistic that the rate might improve within their time frame. One of the advantages of the market order is to ensure that the currency is bought at the desired level even if the market only touches that level very briefly – and this includes when the markets are closed for trading.
  • Forward contract– This allows you to fix a rate of exchange up to two years in the future in advance of a payment. This tool is very popular among property buyers as it allows them to fix the whole price of the property ahead of completion giving them the peace of mind and the certainty of how much they are going to pay for the property.


The importance of Time

Time is your biggest friend. The more time you have, the more opportunity you have to take advantage of these tools and increase your budget. It also allows you to add some certainty around your budget. As soon as you know your budget, you need to be speaking to a specialist.

Why moneycorp?

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.

Mar from Moneycorp

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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