Interest Rates: How interest rates can affect your property price when buying in France

As we saw last week, the pound hit a 2 year low against the Euro, falling to 1.147 (15th June) compared to a 1.17 (9th June) the week before. But what caused this you may wonder.

In this instance, the Bank of England announced their interest rate hikes in their monthly meeting. This was slightly lower than expected at 1.25%. Markets were expecting a higher increase and so as a result, the Pound fell against its counterparts.

How does this affect your budget?

As an example, for a buyer looking to purchase a property for $300,000, it would cost them a £254,885 at the rate of 1.177. At the rate of 1.147, this would have cost 261,555. In the space of 6 days, your price has increased by £6,600.

If you are a buyer who is working with a tight budget, £6,600 can be the difference of not being able to afford your property.

How can you prevent this from happening?

Fortunately, there are tools available to you to prevent your budget from being affected by a drop like this.

Using a currency specialist opens the door to a multitude of options for you. You have access to a competitive rate of exchange and the expertise of a currency specialist whose role is to help you plan your transfer to make the most of your money.

Here are an example of a few of the tools available to you and how they can benefit your exchange:

• Spot contract– A spot contract is an agreement between you your FX provider to exchange money and buy foreign currency at the present exchange rate. This is the most common and traditional form of currency exchange and is suited to addressing any imminent currency transfer needs you may be.
• Market order– you could target a rate of exchange and if that rate is then hit, we could either buy the funds for you automatically, or notify you for your permission to buy. With the same principle we can set up a limit order to protect your transaction in case the rate falls below a certain level. This suits those who have some time on their hands and are optimistic that the rate might improve within their time frame. One of the advantages of the market order is to ensure that the currency is bought at the desired level even if the market only touches that level very briefly – and this includes when the markets are closed for trading.
• Forward contract– This allows you to fix a rate of exchange up to two years in the future in advance of a payment. This tool is very popular among property buyers as it allows them to fix the whole price of the property ahead of completion giving them the peace of mind and the certainty of how much they are going to pay for the property.

The importance of Time

Time is your biggest friend. The more time you have, the more opportunity you have to take advantage of these tools and increase your budget. It also allows you to add some certainty around your budget. As soon as you know your budget, you need to be speaking to a specialist.