Recent sterling movements could tell us something important when sending money overseas.
Following Theresa May’s call for a snap election, the pound rose around two cents in value against the euro. Consider the impact that this could have had on a property transaction during the afternoon of April 18; a European property bought for €300,000 could have cost around £4,500 less than before the election announcement at 11.05am, due to a sharp strengthening of the pound. However, this relative strengthening of the pound was short lived. The result of the first round of the French elections was announced less than a week later, and the foreign exchange markets seemed to be reassured by Emmanuel Macron’s decisive first round victory – despite the fact that support for the anti-EU candidate Marine Le Pen was generally higher than expected.
This meant the euro pretty much gained back what it lost against the pound following May’s UK snap election announcement.
This highlights the fact that exchange rates can be volatile and can move sharply in either direction in a matter of days – even hours. So, if you have an impending property transaction, it’s worth thinking about future rate movements – and how you can get the best rate at the time you come to settle your sale or purchase.
Analysts at Deutsche Bank called the snap election announcement a game changer for sterling.
They have slightly changed their negative views on the pound, suggesting it is now unlikely that the pound will fall as low as parity with the euro (where £1 equals the equivalent to €1). Should the Conservative Party win a larger majority then it could improve the party’s domestic position and make for smoother EU separation negotiations too – a scenario that could prove stabilising for sterling. Equally, a final Macron victory could prove supportive for the euro.
However, if another political surprise landed, and Le Pen were to win the second round, then this would certainly make the future of the EU look more uncertain – and the euro might well weaken. Brexit negotiations certainly have plenty of potential to agitate the currency markets too – sterling in particular.
In Australia – another British property buyers’ hotspot – analysts at Barclays now expect the pound to rise against the Australian dollar. This is on the basis that the Aussie dollar tends to weaken during times of geopolitical tensions, as we witness escalations in countries such as Syria and North Korea.
If correct, such a move could be good for those buying in Australia, but may not be so good for anybody selling a property and moving back to the UK. The pound has shown an upward trend against the Aussie dollar since March, and is worth around 10 cents more than it was a month ago. However, in reality, even the experts find it impossible to predict currency movements with any accuracy.
These are some of the reasons why it could be worthwhile considering a foreign exchange specialist when settling a property transaction.
We have partnered with exchange experts moneycorp, to bring Telegraph International Money Transfers. moneycorp provides readers with access to an allocated personal account manager who will provide expert market guidance and assist you with every aspect of your currency transaction. This expert can explain the specialist tools available to help protect you from exchange rate movements, such as a forward contract for example, which allows you to secure an exchange rate for up to two years.
So, if you’re happy with a rate right now, but don’t need to make your transfer until further down the line (as is often the case when purchasing property due to the protracted nature of the process), you can fix the prevailing rate. Please note that a forward contract may require a deposit.
Our readers also get access to exchange rates that could be more competitive than those of a high-street bank. The savings you could make are by no means insignificant and could end up going some way towards covering the legal fees, or even paying for renovations to a new home. Furthermore, the maximum transfer fee starts at £4 online up to a maximum of £10 over the phone – while high street banks can typically charge between £20 and £40 for each transfer. Plus, our readers are offered their first transfer free of charge.
“Exchange rates can be volatile and can move sharply in either direction in a matter of days – even hours.”