5 questions to ask your currency broker when buying a home overseas

5 questions to ask your currency broker when buying a home overseas_02

Buying property in your home country can be daunting enough; buying property overseas adds extra hurdles. 

But don’t be put off – you can do it! 

Once you have decided to take the leap, your mind will be awash with thoughts of enjoying this life-enhancing experience: sun, sea, snow, city living – whatever your destination and motivation, it’s going to be an adventure. To turn this dream into a reality, however, you must focus your mind on the task at hand: securing the keys to your ideal home overseas – and overcoming any hurdles that might get in the way. 

Whether you’re using your life savings or equity from a property sale to fund your purchase, don’t leave your budget at the mercy of the currency market. Exchange rate fluctuations have the potential to make your overseas home much more expensive during the property buying process. So, how do you prevent these market movements from causing the cost of your home to disappear out of reach? 

The benefits of working in partnership with a currency broker like Central FX to facilitate your international payment requirements are compelling. One of the biggest advantages is the personal service you will receive from your very own account manager. For anyone buying property overseas, the expert guidance and insight they can provide into the currency market is invaluable. It could mean the difference between completing your purchase or exchange rate fluctuations scuppering your plans. 

To make the most of this expert personal service, here are six pertinent questions you should ask your account manager before you begin making international payments:  

1. What causes exchange rates to fluctuate so frequently?

Currencies are traded around the clock – 24 hours a day. Therefore, the value of the pound against all other currencies is constantly in flux. Even small changes can make a big difference to the price of your property. Why does this happen?

Currencies strengthen and weaken in response to political and economic variables, including interest rates, inflation, GDP, consumer confidence and elections – all of which indicate how a nation’s economy is performing. For example, positive news for the UK economy – like an interest rate hike – has the potential to cause the pound to rise (strengthen) in value; while bad news – like a below forecast GDP reading – could cause the pound to fall (weaken) in value.

2. Should I try to predict the currency market?

We often know when exchange rates might fluctuate, because we know when factors that influence them, like elections and economic data releases, will occur. However, we can’t precisely predict which direction they will move or by how much because we can’t be sure of the outcome of these events. Take the Brexit vote for example, when the British public defied most predictions by voting to leave the EU, causing the pound to fall off a cliff. Not to mention completely unforeseen events like the Covid-19 pandemic, which blindsided economies and currency markets. 

Unless you have a crystal ball, it’s impossible to accurately predict how exchange rates will perform. If the forecast you’re depending on ends up being inaccurate it can seriously dent your budget. Therefore, it’s prudent to plan for all eventualities by working in partnership with your dedicated Central FX account manager.

3. How do I protect my budget from exchange rate fluctuations?

The dynamic nature of exchange rates means agreeing to buy a property overseas at one price and paying for it weeks or months later involves a degree of risk. The easiest and most effective way to protect your budget from these fluctuations is to execute a Forward Contract with the help of your Central FX account manager. This allows you to lock in an exchange rate for a date in the future, guaranteeing the price of your dream home when the time comes to pay.

4. How do I make ongoing payments once my purchase is complete?

Your international payment requirements won’t suddenly stop the moment you’re in possession of the keys to your new home. From making mortgage payments to transferring a pension or salary, you will have ongoing payments that need managing effectively. 

Using a Regular Payments Plan, Central FX can help you set up fee-free automated payments to occur as frequently as you wish – whether it’s weekly, monthly, or more irregular intervals. As well as offering convenience, the service allows you to fix the exchange rate, so you know how much you are sending and receiving every time.

5. Will my money be secure?

As with any financial transaction, it’s important to know your money is safe. At Central FX, we segregate and safeguard our customer funds in accounts held with mainstream banks and in accordance with relevant regulations. We don’t speculate on the currency markets. When you instruct us to perform a foreign exchange transaction, we immediately instruct a covering transaction with a counterparty.

Get help from the experts

Don’t fall into the trap of accepting currency risk as the norm, leaving your finances exposed to unforgiving market movements. Achieve the foresight your business needs to gain a firm footing within currency markets by working in partnership with a specialist in corporate foreign exchange, like Central FX. We use our extensive knowledge and experience of managing currency markets to help your business implement a pragmatic approach to risk management using tailored solutions. 

We will take the time to develop an in-depth understanding of your business’s unique requirements, commercial context, and market expectations. Armed with this vital knowledge, we can help you define the risks your business faces, identify their potential impact, and tailor a bespoke hedging strategy that’s aligned to your unique risk appetite – so you can adopt that all-important proactive approach to currency risk management.

To speak to us about how we can protect your business from any significant currency moves, get in touch with Central FX.

P: +44 (0) 20 7265 7979 E: info@centralfx.co.uk