Home » Currency transfer – Why it pays to think ahead/buy ahead

Currency transfer – Why it pays to think ahead/buy ahead

Many of us still dream of buying a property in Italy. Buying a property overseas involves a big financial outlay, with foreign exchange being an aspect that is often overlooked. Planning ahead, talking to a foreign exchange expert such as World First and doing your homework on the different currency exchange arrangements, will pay off.

Buying a property means you will have to transfer your pounds into euros. How you go about completing your transfer(s) could make a huge difference to the cost of your property.

Shifts in exchange rates are common and rates are constantly moving. Imagine entering into a contract to buy your dream property abroad and before you’ve paid for it the exchange rate shifts to go against you by 10% effectively increasing the sterling cost to you by 10%.For example, last August a house on the market for €250,000 would have cost you £194,850. By the beginning of September that had gone up to £204,580 an increase of £9,730 in a matter of weeks.

Elisabeth Dobson, of World First foreign exchange broker warns, ‘don’t leave your foreign exchange transactions to the last minute. It could leave you exposed to the prevailing exchange rate and you may not have adequate funds to buy your property. With some of World First’s products you can protect yourself against negative exchange rate fluctuations.

A forward contract allows you to fix a rate for a date in the future (up to 2 years ahead). This means the rate and therefore the sterling cost of your property is fixed regardless of exchange rate moves.

A currency option, like a forward contract, allows you to exchange one currency for another on a future date. However, with an option you can fix a ‘worse case rate’ and unlike a forward contract, if the rate moves in your favour you can benefit.

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Elisabeth continues, ‘these structures are becoming more and more popular especially given the recent violability and unpredictability of the currency markets. Forward planning will ensure your dream of a home in Italy becomes a reality’.

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