The currency risk involved when using a Euro mortgage

Have you chosen to finance your property purchase with a euro mortgage? If so, being aware of the often-unpredictable foreign exchange risks to your mortgage payments are a must.

If you decide to finance your property purchase in France with a French mortgage, you need to be aware of the factors that could determine how much you pay for your mortgage.

One significant example of this is currency exchange risk.

If your income is not in euros, you are facing an ongoing risk with regards to the mortgage repayments, and if you look at the volatility of the GBP/EUR in the last couple of years, you’ll realise that keeping the risk under control is an important consideration.

To put this into perspective, over the last five years, the GBP/EUR exchange rate has hit a high of 1.2152, meaning a repayment of €1200 a month would have cost a UK buyer £987. However, it has also gone as low as 1.0607, which would increase your monthly payment to £1,131. Over the course of a year, that difference is £1,730, and for a 25-year mortgage, this could equate to as much as £43,250 -all because of changes within the foreign exchange rates.

These adverse movements can have a significant impact on budgets and, in some cases, could even prevent buyers from being able to afford mortgage repayments, emphasising the risks involved when managing longer-term currency exposure.

The good news is that with the use of a foreign exchange service provider like Moneycorp, there are ways of minimising the risks posed by the currency markets and perhaps even taking advantage of any subsequent positive movements.

Moneycorp allows clients to use a forward contract to fix rates of all payments for up to two years. This will protect you against any future fluctuations during that time and lock in your mortgage cost.

Clients who are less risk-averse can work with a dedicated market specialist to target specific rates of exchange that benefit them; once these rates are achieved, the payments are triggered via market orders.

Moneycorp also offers recurring payment plans via direct debit for those with international mortgage requirements. This gives you peace of mind and mitigates the risks of manually sending payments each month.

Remember, if you haven’t bought the property yet or are waiting for completion, get some guidance on the best way to deal with the payments involved. If you are paying in a different currency, the exchange rate will determine the final price of the property, and therefore, it is essential to rely on a specialist company to offer you a competitive rate but also different solutions depending on your circumstances.

*Forward contracts may require a deposit

Beware of currency risk. None of the information contained in this article constitutes, nor should be construed as financial advice. TTT Moneycorp Limited (company number 738837) is registered in England. Its registered office is at Floor 5, Zig Zag Building, 70 Victoria Street, London, SW1E 6SQ. Moneycorp is a trading name of TTT Moneycorp Limited which is authorised and regulated by the Financial Conduct Authority for the provision of payment services (firm reference number 308919). Date of Approval: 06/02/24