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Stuart Rogers, Senior Account Executive, Private Client Team, Moneycorp

Buying a property abroad is often the realisation of a personal dream and can be one of the most exciting experiences of your life. All too often, however, it is also one of the costliest, particularly when it comes to transferring funds overseas. With exchange rates constantly changing, and fluctuations of as much as 10 per cent in a short space of time not uncommon, this vital and often overlooked element of the purchase process can make a huge difference to the eventual price you pay for your property.

Take the US Dollar as an example. Last July, a series of downbeat economic figures appeared to indicate that UK interest rates would not so much fall as plummet. Investors rushed for the door and Pound Sterling fell from $1.83 to $1.73 within just a couple of weeks. For a property buyer in Orlando, this meant that a $350,000 smart four-bedroom home could have increased in cost from £191,000 to £202,000 in just a matter of days.

So what options are available to buyers looking to limit their exposure to such fluctuations and get the most for their Pound Sterling?

Banks versus currency brokers

While high street banks are often the first port of call for foreign currency transactions, specialist currency dealers will normally offer property buyers superior rates of exchange, in addition to a more comprehensive range of services that will help protect them from adverse currency movements.

The most straightforward of these services is a spot contract - the purchase or sale of a currency for immediate delivery. These are suitable for clients who have an urgent requirement for currency and are seeking the best exchange rates with fast and efficient delivery.

Forward contracts

Property buyers who need to make a series of transactions on a longer term basis, and are particularly concerned about adverse currency movements, can also take advantage of forward contracts. This fixes an exchange rate for the purchase or sale of a currency for delivery up to two years in the future.

Stop loss & limit orders

Two further options for minimising exposure, available mainly from specialist foreign exchange suppliers, are stop loss orders and limit orders. A stop loss order allows a client to set a minimum level at which currencies are bought or sold. These are suitable for individuals wishing to protect their finances, whilst allowing for the market to move in their favour. A stop loss order can be raised in accordance with currency movements, thereby increasing the protected profit margin.

A limit order allows a client to set a higher target exchange rate at which, if the rate is achieved, their currency will be purchased. A limit order is suitable for individuals that have funds to transfer and are looking to make the most of any favourable currency movement that occurs. Running a stop loss order in parallel with a limit order means that, effectively, upper and lower currency trading thresholds can be set, making currency transactions more predictable with rates guaranteed within a given range.

What it costs

Property buyers who need to make regular currency transfers are also particularly well catered for by specialist currency dealers. Many will offer regular payment plans, which remove the worry caused by exchange rate fluctuations when making currency payments over a period of time. In addition to the obvious benefits of receiving superior exchange rates which are fixed for a period of two years, users of regular payment plans also benefit from significantly reduced transfer fees compared to those charged by banks.

Indeed, the majority of high street banks will charge you a fee for sending money abroad, regardless of the amount. The local bank may also make a substantial charge for receiving the money. A reputable currency dealer may well be able to reduce these charges substantially.

How long it takes

A further source of confusion for potential clients can often be the length of time that transfers take. Whereas a bank will often put through the transaction when it suits their business process, a currency broker will do so when the timing is most beneficial for you. Depending on the cut-off times, transfers to Europe and North America can usually be made the same day, whilst transfers to destinations further afield usually take around two days.

Do not let foreign exchange be an afterthought

While buying a property overseas is not always a simple endeavour, foreign exchange need not be complicated and costly. The key factor is that it does not get overlooked. When it comes to your currency provider, make sure that you are getting value for money from your exchange transactions.

Biography

Stuart Rogers is a Senior Account Executive on the Private Client team at Moneycorp Commercial Foreign Exchange. Moneycorp is part of the TTT Moneycorp Group, which has been dealing in foreign exchange since 1979. To find out how Moneycorp can help individuals buying overseas, contact our Private Client team on +44(0)20 7589 3000 or email enquiries@moneycorp.com.

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