If you’re looking to buy a ski home, it’s important to remember that transferring large sums of money abroad comes with an element of risk. The currency markets can be unpredictable at best, so protecting your property buying budget from currency fluctuations is crucial.
How could the currency markets affect my property purchase?
In such uncertain times, and at any time for that matter, it’s impossible to predict what the currency markets will do next. The price of a property could change dramatically overnight, possibly by thousands, if the market fluctuates.
Unfortunately, these currency swings have meant that people have had to abandon their dream to buy a home abroad because they didn’t lock in their currency. Some even lose their deposit because a dramatic swing in currency took the price of the home beyond reach.
Could I lose money on my property?
For example, imagine you are buying a ski home in France for €200,000. The price is in euros, but you hold your money in pounds. At the time of agreeing to buy the property, it will cost you £171,292 at the rate of 1.17.
However, by the time you come to hand the money over a couple of months later, the pound to euro exchange rate has dropped to 1.13. The property will now cost you over £178,000 and you have to find an extra £7000 to pay for it!
The currency markets can, of course, move up as well as down, but it’s impossible to know whether you’ll save money from fluctuating exchange rates or lose money – so why take the risk?
How can I avoid paying thousands more for a property?
In this current climate of uncertainty, taking a chance on the currency market is extremely risky. Anyone in mid-purchase now who did not plan ahead could face the prospect of their home costing thousands more.
The economic aftershock of the coronavirus crisis will continue for quite some time. If you’re looking to buy this year, or over the next coming few years, you need to plan how you’re going to send your money safely.
For many people, that means a forward contract. This locks in the day’s exchange rate for the next twelve months. Anyone who had done so when the dollar leapt to a 35-year high, for instance, would have guaranteed that rate for themselves for the next year, even when the live markets drop.
In many ways, the problem is complex, but the solution is simple: removing your money from the live exchange markets. Learn more about how to buy safely in this volatile time in the Property Buyer’s Guide to Currency.