Navigating Currency Questions: Expert Insights

The answer to this question will depend on your circumstances. There are advantages and disadvantages to both options when it comes to currency exposure. If you choose a mortgage in France, your debt or liability related to that asset is in the same currency as the asset. If you don’t hold that currency, and you need to exchange your funds to cover your mortgage liability, you’ll have to consider that if there are any negative fluctuations affecting the exchange rate, it could really impact the cost or value of the property. For example, in 2022, the GBP/EUR rate fluctuated between 1.2188 and 1.0843. The difference in the cost in pounds on a €2,000 monthly payment at these rates would have been over £200.

If you had chosen a cash payment in these circumstances, you would only be exposed to the effects of currency volatility for your deposit payment and the completion payment, which makes it easier to manage and plan for. Getting help from a currency expert in this scenario would help you gain a thorough understanding of the pros and cons of each option and allow you to decide with confidence.

Some mortgages in France have different restrictions than we see with overpayments in the UK. Euro mortgages often come with low or no charges for early repayment, which means you can wait for the exchange rate to move in your favour before paying off the mortgage.

Currency specialists have various tools to help you track a desirable exchange rate and make the exchange automatically when the rate is reached. These are called ‘market orders’. It is a great tool when you are optimistic that the exchange rate might improve. They can be used alongside a ‘stop loss order’, which can help protect your transaction from going below a specific rate if the market moves against you.

When managing costs in different countries, it can leave you in an uncomfortable position of taking on a 50/50 risk that the rate will move against you. The role of a currency specialist is to help you manage your risk and protect yourself from volatility in the market. In this situation, you could take advantage of the possibility of fixing the exchange rate using a ‘forward contract’ – for up to two years – to give you certainty over your payments.

If you are in the UK, you could also combine this tool with a regular payment plan, which allows you to set up a direct debit so that your payments are automatically collected and exchanged every month at the agreed rate without you having to think about it.

High street banks do not usually provide these type of solutions; most foreign exchange specialists can offer you cost-effective alternatives to manage the risk involved in ongoing payments.

Mar Bonnin-Palmer is Head of Partnerships at Moneycorp.

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