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Currency matters … A Case Study

We have all seen the TV programmes depicting life in France and how the pace of life is so much slower than the one we are used to in the UK. How many of us scour the internet looking for property to buy in France and being quite amazed at just what we could get in France for our hard earned Sterling?
I know that I did.
OK, so you have decided that you want to really go for it and buy a house in France. It may be an all or nothing decision whereby you sell up entirely in the UK, or you may want to test the water first and buy a holiday home initially.
Either way, you will want to put some serious thought into it and also a lot of homework. One of the main considerations with buying a property here in France is location. You will also want to make sure that the property you see in the internet pictures is not next to something that cannot be seen in a picture, but you would not dream of living next too.
Having decided on a selection of properties you will want to visit them. Once you see them in real life you will get a really good feel about the location, whether in a town or village or isolated and miles from nowhere.
Then you find `The One`! You get all excited and want to move in immediately! You are in a position to buy and make an offer. Hopefully, with a little negotiation, you agree on a price. Once this is done you will sign a compromise-de-vente, (which is a promise to sell) with a 10 day cooling off period.
Once the cooling off period is over you will need to place a deposit of around 10% of the total cost. The normal period to completion is around 3 months.
With this done, have you thought about how you are going to transfer your Sterling or any other currency in or out of the Eurozone?
If you instruct a bank or building society to convert the funds into Euros you will pay typically around 4% more than by using a currency specialist who will offer you a better rate of exchange.
This could make the difference of either having, or not having a swimming pool for instance.
A currency specialist will source live market exchange rates which as we know are volatile and can change by the second. This will enable you to be kept informed of the rates and could help you save thousands of pounds on your transaction.
Once the deposit has been arranged you then decide how to transfer the remaining funds to complete your house purchase.
The first option is to do exactly as you did when you secured the deposit. What must be taken into account is the exchange rate which could vary over the remaining time until taking possession of the property, thus meaning that the cost could vary greatly.
The second option is to fix your rate in advance with something known as a `Forward Contract`. With this solution you will know exactly how much your property is going to cost you in Euros and Pounds. If the rate goes down you do not have to worry and thus taking away any risk of market movements.
A Forward Contract is available typically for 12 months and will require a 10% deposit which is not a charge but will be deducted from the balance.
I purchased my house here in France in 2008 around the time of the financial downturn. I did all of the homework as described and signed for the property. Unfortunately I was not aware of the likelihood of serious market fluctuations at the time and on the day of signing the contract, the rate was 1.47 Euros to the pound. When the time came to transfer the remaining balance, the rate had dropped to 1.27. On a balance of 100,000 Euros, a big loss indeed!
I now use a currency specialist to transfer all my money across to France, and tell my friends to do the same!

Paul Allen is part of The France Team for Cambridge Global Payments.
Contact number 00 33 549 97 02 91
Email: paulcambridgefxfrance@gmail.com

Paul Allen

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