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Change your Exchange Mindset - Spend Euros & Save Pounds


Change your Exchange Mindset - Spend Euros & Save Pounds

It surprises me how many Brits I meet who have purchased property in France and have not fully thought through the exchange rate process - converting pounds to euros. "There's enough money in the bank at the current exchange rate to do the deal so fine, let's just celebrate our new purchase". "I know nothing of international money markets, my bank will arrange everything." "I've only bought a second home and it's really not that expensive." "I've retired to France and my pension income is in sterling, my bank sends me an amount monthly in Euros - I've used the same bank for years with no problems".

As a professional buyer and dare I say it, a Scotsman, this leaves me a little twitchy. A centime saved is a centime earned as some Francophiles may say. Many are aware that specialist foreign exchange brokers can offer better rates than the banks but a surprising number stick with the banks they know. One leading foreign exchange dealer quoted me an astonishing figure of some 80% of people still using the banks to convert their money.

Using a foreign currency dealer can be worthwhile if you wish to pay a deposit for your French home now, pay the balance of the property later in the year, need a monthly income in Euros from your sterling accounts, or have some other expense where you need to convert currency to Euros.

The savings can be considerable. When we bought our place in France, I obtained three quotes from different exchange dealers. There was a big saving on the standard bank rates from all the dealers and having the three quotes was also worthwhile enabling us to make yet further savings. Three quotes are always better than one, if only for peace of mind that you have achieved the best rate.

The first step is to choose 1, 2 or 3 foreign exchange or FX dealers and set up an account with them. This is free and there is no obligation to trade. You will then be able to purchase currency quickly should the need arise. Once an account is set up a simple phone call will give you a confirmed rate and allow you to trade.

It's generally an easy and straight forward procedure to set up an account with a foreign exchange dealer. Complete and return their application form along with proof of ID and residence. You will then be given a client reference number which you should quote when calling for a quote or to trade. When you have agreed a trade ie currency conversion rate, amount and date for the transaction, you will need to arrange a transfer of the necessary funds from your bank to the exchange dealer's bank. Normally this can done through an electronic bank transfer.

We did this and got our three quotes for the deposit of the house. When the house sale had gone through and we had an entry date and thus a definite date for paying the balance, I again got three more quotes, this time for an agreed amount on a given date in the future. In our case it was nearly six months away. Here it's a gamble, you could lose out if the exchange rate went up but alternatively, would you (should you) be prepared to take the risk that rates move against you leaving you with a much more expensive purchase than you had bargained for.

In the year to start March 2010 the Sterling / Euro rate fluctuated between a high of 1.19040 and a low of 1.05210 (source: Oanda Corporation). This is a difference of some 12%. I wouldn't like to add anything like this amount to a house purchase. More extreme variations have also been seen in recent times.

Choose your exchange dealers, set up your accounts and then you can trade at your convenience. Think ahead and fix a rate for your French house purchase. At least you know what you will be paying at the end of the day.


(Published March/April 2010)




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