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CURRENCY MATTERS A


long with taking suffi cient legal advice and considering the various fi nancial costs, exchange rates should always be a key consideration if you are buying a home abroad.


Buying an overseas property will always require you to exchange your pounds into another currency and transfer these funds abroad – unless you have funds already in your chosen country. Then, once you’ve bought, you will probably need to make regular payments overseas from the UK, to meet mortgage repayments, and pay local bills or taxes.


If you are retiring abroad you’ll need to have your pension paid monthly into a foreign bank account. Of course, your bank will be able to do such


currency transfers for you, but you will usually get more favourable rates using a specialist currency – or FX – broker. These days, there’s much more awareness of


currency brokers and their services, not to mention a large number to choose from so the market is positively competitive. You can typically save up to four per cent than when using a bank, and then there’s also the hassle-free aspect of the service (you transfer sterling to your broker and they do the rest such as making regular payments abroad). Brokers will also allocate your own


personal account manager, and will have on-line account access.


You can fix today’s exchange rates for up to two years with a forward contract, and only lodge 10 per cent of the total you want to convert initially.


Currency brokers can buy your currency at the exact time that rates are best, and if you are not restricted by time with your purchase, “stop-loss orders” and “limit orders” allow you to buy currency when your preferred exchange rate is available. Your broker would monitor the currency markets and keep you updated.


Also in common use now are “forward contracts” which effectively protect your buying power from currency fl uctuations by letting you fi x an exchange rate for a future transaction. This makes fi nancial planning easier. You can fi x today’s exchange rates for up to two


years with a forward contract, and only lodge 10 per cent of the total you want to convert initially. It’s a very popular type of contract in today’s climate of economic uncertainty. With a forward contract you can either fi x the date you wish to take delivery of your currency, or have the option of taking delivery at any point up until the agreed date. You can fi x the amount of pounds you send abroad on a regular basis, for example monthly, which means the amount of local currency you receive in your foreign bank account will fl uctuate with the exchange rate; or you can fi x the amount of local currency, for example euros, that is paid into your overseas account, meaning the amount of pounds being debited from your UK account will fl uctuate with the exchange rate.


Fluctuations in exchange rates can have a huge impact on a large purchase such as a home and even on smaller regular payments, so speak to a specialist to get the best rates and advice.


AIPP CONSUMER GUIDE 17


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