When Should I Buy Euros for my Deposit?

If you are looking to exchange large sums of money from pounds into euros over a broad timescale, as you would when buying French property or any overseas property, think about ways to get the best deal and protect your money against exchange rate fluctuations.

There are two ways of securing the best exchange rate for you within your timescale:

The Spot Contract

The Spot Contract is the most basic and popular foreign currency exchange product. It’s an agreement to buy or sell one currency in exchange for another. You have two days to settle the contract, at a price based on the prevailing “spot exchange rate”, the current value of one currency compared to another.

Although the spot market lets you buy or sell currency as you need it, spot exchange rate movements are highly unpredictable, even during a single trading day. Once funds clear, the currency is available for onward transmission.

Or you may want to leave the money in your domestic account to accumulate interest and convert it only just before signing contracts. This can be risky, however, as the Euro and pound fluctuate in value, leaving the final price in pounds uncertain.

Forward Contract

A Forward Contract lets you buy or sell one currency against another, with settlement no later than the contract’s expiry date. Unlike spot contracts, a forward contract eliminates exchange-rate risk by locking in a price today for a transaction that will take place in the future (up to 2 years).

A 10% deposit is required to secure the contract and is payable within two working days, with settlement due on the contract’s expiry date.

Peace of Mind

The forward contract gives you peace of mind because you know exactly what you’ll pay for your overseas property, so you can budget without surprises. It’s especially useful for new-build properties with 3- or 4-stage payments over 18 months, so you don’t go over budget.

Plan in Advance

Also, because you don’t have to pay for the Euros until the maturity date, it frees up cash and gives you time to arrange financing. You will only need to pay a 10% deposit of the amount you wish to buy, with the balance due on maturity of the contract.

This option is also helpful if you receive a pension in sterling but live overseas. In this case, you may want to know your monthly income up to two years in advance so you can plan your finances.

Also, if you pay a French mortgage from a pound sterling bank account, you can keep your monthly outgoings the same by entering into a forward contract.

The Most Popular Option

If you can afford to take the risk and speculate on the foreign currency market in the hope of paying a lower price for your property, then it may simply be best to buy Euros spot as and when you need them. But for most people, the second option makes more sense.

Work with our Currency Experts

You have two options: use a regular bank you are comfortable with, or speak to our currency specialist, who focuses exclusively on money transfers and can offer better euro exchange rates and more personal service.

Either way, your money is precious, and you need peace of mind. If you want to save serious cash, talk to the experts.