Currency brokers reported a surge in clients opting to fix exchange rates as the pound strengthened against the dollar and euro last week. This followed positive news about the UK economy and saw the value of sterling rise to €1.17, up from just €1.14 at the start of the month. Analysts expect sterling to weaken again later this year
This has led to increased numbers of overseas property owners locking into the better exchange rate through forward contracts while they’ve got the chance, so they know what their outgoings will be well in advance. The stronger pound has been attracting prospective overseas buyers too, as it will boost their affordability. The difference in €1.17 and €1.14 is quite significant when you translate it into property prices – it means that for someone considering a home worth €200,000, the property now costs £170,940 compared with £175,439 at the start of the month. A saving of around £5,000, which is pretty good.
A forward contract, which allows you to lock into a rate of exchange for a future date, is popular with people who are planning to invest in overseas property, as it means they can be sure of the exchange rate throughout the whole process, which can take several months.
When it comes to budgets, it’s also important for prospective buyers to establish how much they can afford before agreeing to anything. An ‘Approval in Principle’ (AIP), will do just that – it’ll tell them exactly how much they can borrow and what price range they can realistically consider when conducting their property search. It will also prove that they’re a serious buyer and could make them better placed to negotiate price. And it costs nothing.