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BLOG: Capitalise on a weak euro – buy a property in Europe

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Written by: Jordan Tilley, Head of UK & Europe at UKForex,
13/04/2015
2015 has seen the euro take a dive and stay weak against the pound, making now a great time for Britons to buy property in Europe. It seems we can’t read the news without being told how we can save money when buying villas or cottages in France and Spain.

Yet, despite the favourable conditions, new data commissioned by international currency transfer specialist UKForex shows the majority of Britons are still very cautious about taking the plunge.

Political issues around the EU – like the threat of Greece and Britain leaving the EU, ‘Grexit’ and ‘Brexit’ respectively – are dissuading Britons from investing in European property, rather than encouraging them to jump in on the weak euro. All in all, 55 per cent of Britons do not see overseas property as a secure investment.

The data indicates that Britons lack confidence when buying property abroad, and don’t know how they can make the most of currencies, including the current weak euro.

Here Jordan Tilley, head of UK and Europe at UKForex, explains how you can better understand currency, avoid losing money on exchange rates and, in fact, use them to your advantage when buying abroad.

Three steps to using foreign exchange effectively

When it comes to payments and currency, the most important factors are:

1. Currencies and their fluctuations
2. Choosing your transfer provider carefully
3. Getting to grips with your payment options

1. Currencies and their fluctuations

The amount you are spending on the property in euros may be fixed, but the amount it will then cost you in pounds will change, depending on when you need to transfer your money as the relative values of the currencies change against each other overtime.

The value between two currencies is the exchange rate. It affects the international value of your pounds, so it is vitally important to understand and stay on top of it. Our survey found that 40 per cent don’t understand the impact exchange rates can have on their finances.

The good news is that protecting yourself from fluctuations between currencies, called currency risk, is pretty simple. The first step is educating yourself on exchange rates.

Sites like Yahoo! Finance, XE.com or Google Finance will show you the current value of the pound against the euro. An understanding of what has been happening over the last six months is extremely useful for setting realistic expectations for where the currency might be heading, and budgeting around that.

Don’t just check exchange rates once, but keep checking them to make sure that there are no surprises and that the rate is still aligned with your budget.

2. Choosing your transfer provider carefully

It so happens that many people don’t know about the variety of money transfer providers. Indeed, our survey found that 39 per cent of Britons admit to not knowing the cheapest way to transfer money abroad.

But, with basic guidelines and some research, you can save a bundle when choosing your transfer provider.

As a general rule, banks do not provide the most cost-effective method of transferring money abroad. A bank will typically quote you exchange rates that are not the most favourable available. On top of this, financial institutions will likely charge a fee on your transactions. While most financial institutions will charge a fee on your transactions, they vary from institution to institution, which sometimes do not even advertise them.

Instead, try getting a few quotes from established, FCA regulated international money transfer companies. Ask questions around pricing transparency and rate consistency before you sign up to ensure you will be getting the best rates over time.

3. Getting to grips with your payment options

Once you are set on your provider, you will need to consider your payment options. These include:

Simple international money transfer – This is the most widespread and straightforward method. This type of transaction is great if you need the money to be transferred right away at the current exchange rate

Forward contracts –They allow you to fix the current rate for a transfer you want to make on a set date in the future. This is great if you are satisfied with the current rate today and means you don’t have to worry about changes in the currency markets affecting your budget.

Limit orders – A limit order allows you to arrange for a money transfer to take place when the exchange rate reaches a certain, favourable level. Having your currency specialist watch the rate via a limit order can help maximise your budget.

These tips will put you in good stead for buying your dream property in Europe. If you do some research and educated yourself on the basics, you’re well on your way buying your dream home without the added worry of currency risk.

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