Buying a property in Spain (or abroad) is an expensive process which most of us may only do once in our lives.  It is probably the largest expense you will make apart from on your current home.  Buying abroad can be fraught with complications but one of the main factors associated with purchasing abroad is often not given enough attention...changing your money into Euros.

Currency forms the basis of many discussions as most people are unsure of which options are open to them and which is the most cost effective.  Most people seem to rely on their bank for transferring money but this could potentially be costing them thousands.  When transferring thousands of Euros to Spain for your dream property you really do need to look into this whole currency subject in a bit more detail.

The Sunday Times recently carried out a survey comparing the exchange rates given by various banks and currency brokers for someone needing €100,000.  The results are summarised below:

Institution	Rate	Cost of €100,000
Lloyds TSB	1.4059	£71,128.81
HSBC	1.4119	£70,826.55
Bank of Scotland	1.4452	£69,194.58
Natwest	1.4460	£69,156.29
Nationwide	1.4486	£69,032.17
Barclays	1.4640	£68,306.01
CFX	1.4653	£68,245.41
FCD	1.4685	£68,096.70
Stirling Exchange	1.473	£67,888.66
Exchange rates obtained on 3 February 2006.		Sources:  FCD, CFX and HIFX

As you can see, if on that day you had used Lloyds bank to get your €100,000 it would have cost you over £3,000 more than using a broker such as Sterling Exchange.  Imagine what you could do with that £3,000...a holiday...put it towards furnishing your property in Spain...etc.  As you can see, it's not always a good idea to use your bank. 

As we at Pocomed Properties are no experts in this matter, we decided to to enlist the help of one of the largest and most respected currency exchange firms, Sterling Exchange, to explain what you should consider when converting your hard-earned money to Euros and  transferring that money to Spain:

When you’ve found your dream home or investment overseas, you will need to perform one or more currency transactions. Don’t rely on your bank to buy your currency. You could potentially make huge savings by using a foreign currency specialist like Sterling Exchange who can offer you a better exchange rate and a more specialised service.

Customer service and expert market knowledge

In addition to offering you the best exchange rates, Sterling Exchange offer a very personal service tailored to your individual needs. Their experienced and friendly team are always available to help answer any questions you may have, no matter how obvious they may seem!

Always remember it is impossible to predict future currency movements, although our analysts are recognised worldwide and Sterling Exchange is ranked as one of the world’s most accurate FX forecasters according to the Reuters monthly Forex Poll. Once registered with them, you will be assigned your own dealer who can explain the risks, inform you of market sentiment and explain how to protect yourself.

Why is understanding about currency volatility so important?

At Sterling Exchange they understand that buying or selling large amounts of currency can often be very daunting. It is important to understand that if you are buying abroad, you are exposing yourself to “currency risk”. Currency movements can make a big difference to the final amount you end up paying for your property because of the time it takes to complete the purchase and subsequently, this could cost you thousands of pounds.

For example, if you had agreed to buy a property, priced at €200,000 in December 2005 (when the GBP/EUR exchange rate was 1.488) it would have cost you £134,409. Had you neglected to fix the exchange rate at the time, that same property would have cost £138,217 by the end of January 2006 (based on a rate of 1.4470), an increase of £3,808 or 2.83 % in 3 weeks.

'Spot' and 'Forward' currency contracts – Remove the risk

If you have all the money available to purchase your property abroad you may prefer to fix an exchange rate to secure your costs. You have a number of options. You can do a “spot” trade. This is where you buy all the currency now and your HIFX dealer will hold it on your behalf and transfer the funds abroad when you need them.

However, if you do not have all the funds available yet to buy currency on a Spot contract but you are worried that future exchange rates might increase your costs, you can still play it safe and buy a “forward” contract. To do this you only need to have access to 10% of the funds initially. It is simply a mechanism to “buy now, pay later” where you are no longer exposed to currency movements.

Making Regular Payments Abroad?

Once you have bought your property abroad, like many people, you may still need to buy and transfer money on a regular basis. Whether for mortgage payments, property running costs or living expenses, you can save time and money with Sterling Exchange Regular Payments Abroad ) service. You can fix an exchange rate for up to 2 years, establish a direct debit with your UK bank and send the currency abroad for no charge. Complete peace of mind.

We hope that that this information helps you understand your options better regarding currency exchange.

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