By Elisabeth Dobson, Head of Private Clients at World First

At the time of writing, we have just seen sterling lose around 3% in value against the euro – in a matter of days.

Whilst on the surface this may seem insignificant, if you’re relying on a sterling income to finance your life in Spain, a shift like this could be make or break time.

The pound started to tumble against the euro during the course of 2008 and in January and March this year, we have been close to parity. Suddenly, paying your euro mortgage is costing you significantly extra or your weekly shop is eating more into your pension. It is a fact that sadly many British expats have had to return to the UK as they just cannot afford to continue to live in Spain, with the increase in prices the strengthening euro has brought about.

Nevertheless, there is help out there to make sure you stay on top of your finances and keep in control. Economists are widely predicting that sterling will strengthen against the euro in the long term, you just need to be able to sit it out until then.

Foreign exchange brokers like World First are a very important port of call for British expats living in Spain. Whether you’re transferring one-off, large sums to either buy property or do renovations, or whether you’re transferring smaller sums to cover euro mortgage payments or living expenses, their services can really make your pound go further.

With the pound as volatile and as weak as it has been against the euro, these top tips should help:

Get in contact Speak with a foreign exchange broker as soon as you can about your transfers. They will be able to explain the economic reasons behind where exchange rates are currently trading and give some indications as to where exchange rates may move in the future to help you plan and budget.

Set up regular transfers

A broker will be able to set up a regular transfer for your pension or to cover your mortgage, thereby reducing your monthly admin as well as reducing or eliminating transfer fees. You can fix the rate for your monthly transfers for a period time or take the prevailing rate.

Plan ahead with forward contracts

A forward contract allows you to fix an exchange rate for a date in the future (up to two years ahead). This means the rate and therefore the sterling cost of your transfer is fixed regardless of exchange rate moves. You can use a forward contract for both one-off and regular transfers.

Fix a firm order

With a broker, you can place a firm order to buy a set amount of currency at an agreed rate. If the level you set is achieved, the currency will be bought automatically. Therefore you don’t have to worry about watching the rates constantly.

Consider refinancing with a euro mortgage

If you currently own your Spanish property outright, you could release equity with a euro mortgage and convert the euros to sterling. Sterling’s weakness could realise an uplift on your initial investment of more than 30% in sterling terms compared to two years’ ago. For example, if you bought a property in Spain for €200,000 two years' ago when the sterling-euro exchange rate was around 1.5, your property would have cost you £133,333. Now the exchange rate is around 1.11, so converting back €200,000 to sterling will give you £180,180.

Consider renting out your property

Letting your property will enable you to earn income in euros, the same currency as your living expenses or in which your mortgage is denominated. You can then pay for living expenses and make your mortgage repayments directly from these funds and avoid exchanging currency.

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