AUG.
Currency Forward Contracts and Buying Property Overseas
What is a currency forward contract?
If you want to hedge your currency exposure, a currency
forward contract is one of the simplest and most accessible ways to do so.
In simple terms a currency forward contract is an agreement
between the client and international payment provider (Currency Online Group) to fix a
currency exchange rate for a future overseas payment.
It is most common to use a forward contract for a payment
due up to 12 months in advance but this can be done for a period of up to 2
years. To lock the rate in a deposit of between 5-10% will be required
depending how far in advance the contract needs to be.
Advantages of undertaking a currency forward contract
Setting a forward currency contract allows businesses/individuals
to be certain of costs around an international payment when budgeting future
expenses.
In turn this mitigates currency risk and protects the
company’s bottom line profit or in the case of an individual purchase, the cost
of the transaction. With outside factors affecting the currency market daily,
fixing a contract eradicates the risk of volatility and allows you to devise a
clear financial plan around your overseas payment(s).
With the future exchange rate locked in it means the price
of the contract cannot change for the given date. This means the rate can move
resulting in a favourable gain for the client.
Examples of why you would use a forward contract:
Forward contracts can prove particularly useful if you have
a transaction coming up that needs to be made overseas and is of sizeable value,
such as:
- Overseas property purchase
- Overseas property maintenance
- Overseas wedding
- Relocation to another country
- Regular or phased payments over time (transfer of salary or
wages)
Using a forward contract for an overseas property
purchase
Just like
buying a property in the UK, obtaining a dwelling overseas does not happen
overnight. The process can take some time to complete, especially at this
present time as we continue to live through the Covid-19 pandemic.
When buying a property overseas, the purchaser(s) will be
working within a budget that they will need to stick to, just like buying back
home. However, one major difference between the two scenarios is the potential for
fluctuations in exchange rates that will need to be dealt with, over the period
of time it takes for the sale to go through, when acquiring property abroad.
Taking out these risks means the consumer has piece of mind that costs will not
unexpectedly increase due to not accounting for these prospective currency
movements. If this was to happen, suddenly the property could become
unaffordable, with sleepless nights ahead. Forward contracts can ensure
complete control of costs and budget when it comes to knowing how much the cost
of the transaction will be by setting the exchange rate for a particular date.
To secure a property overseas a pre-contract, non-refundable
deposit is usually required with the remaining balance due once all the
legalities are complete. In the case of a new build, completion will be due the
home is finally ready to move in. If there are hold ups in the time it takes
for the build to complete, this could mean further movements in the exchange
rate in that time, that could go against the purchaser.
Let’s say for example you are due to pay the balance on a
property purchase 6 months from now of €450,000. If you buy the currency forward
contract today (as of August 3rd 2021) at a rate of 1.166, you would
be required to pay a 5% deposit (€22,500), with the remainder being paid
before the end of the contract. In setting this exchange rate you know that the
remaining 95% of the deal will cost £366,638. If you decided not to use a
forward contract, come the day of completion you would make the international
payment using what is known as the spot rate (rate on the day). If in that time
the Euro had strengthened and the exchange rate had dropped to say 1.12 the
remaining balance due would cost £381,696. That is an increase of £15,058. You
can see from this illustration as to why it is important to protect yourself
from this kind of volatility and why forward contracts are a sensible approach
when it comes to buying property overseas.
Our partnership with Expert Villas
We have teamed up with a leader in the property sector in
Spain and beyond to provide our first-class international payment service to
all of their clients. Expert Villas
currently has over 80,000 properties listed on their website from all major
estate agents in Spain and the Islands. In addition to this Expert Villas has built up a
business directory providing complete assistance when it comes to buying,
selling and moving overseas.
With our expert knowledge of all things, currency, and Expert
Villas in all things property you are sure to benefit all round when it comes
to buying, selling or renting an overseas property in Spain.
How to arrange and agree a currency forward contract with
Currency Online Group
If you feel a currency forward contract is best suited to
your overseas property purchase, then the process could not be simpler. The
first thing is to open an account with Currency Online Group.
You can either follow the link www.currencyonlinegroup.com/international-payment
or if you would prefer some assistance, you can contact our professional
International Payments Team on 0208 050 1546
A dedicated account manager will guide you through the
process and discuss what the best option is in regards to your forward contract
and fixing the exchange rate, based on your circumstance. While forward
contracts prove highly popular when it comes to overseas property purchase,
there are other FX solutions available that the team would be happy to go
through at the same time.
Benefits of making your international payments with Currency
Online Group:
- No Fees or Charges
- Fully FCA Authorised
- Bank beating exchange rates
- Dedicated team providing a personalised service
- Access to online platform 24/7
© Currency Online Group
3rd August 2021
MAY.
28th May 2021
Where can I get cheaper PCR tests for the UK’s travel
traffic light system?
All passengers are required to take pre-departure private
PCR tests when arriving back into UK from all categories of the new traffic
light system.
It’s fair to say there is much confusion over what is
required when it comes to booking testing and where to go to do this, as well
as which standard of covid-19 test will suffice to grant you permission to gain
re-entry into the UK.
Firstly, let’s address the small matter of what needs to be
done before you leave the UK in terms of your destination country. You must
check the specific conditions of the country you are travelling to and what is
needed to cross border control on arrival. The Government website provides
all entry rules per country in response to Coronavirus (Covid-19). Here you
will find any updated changes and which rules need to be adhered to/proof of
testing or vaccination shown. While some countries may not require proof of a
negative covid test result, some parts of certain countries may require this
when checking into tourist accommodation.
So, you need to book covid tests for pre-departure of the
country you are staying in? What do you do next?
The Government is not accepting the NHS tests as proof and
therefore all covid-19 tests need to be booked privately.
Antigen tests, PCR tests…which ones are acceptable??
According to Gov.uk the test must meet certain standards to qualify.
Its states that the performance standard of the test must be
≥
97% specificity, ≥ 80% sensitivity of viral loads above 100,000 copies/ml.
This means there is not one specific type of test that is
accepted and the options can include the following:
·
a nuclear acid test, including a polymerase
chain reaction or PCR test as we now refer to them
·
derivative technologies, including
loop-meditated isothermal amplification or LAMP tests
·
an antigen test, such as a test from a lateral
flow device
In light of the new travel covid testing requirements, many
companies now offer options to cover all criteria of countries placed in red,
amber and green categories. Airlines and travel companies have also teamed up
with such organisations to present those passengers with discounts and access
to cheaper private covid testing.
The airline has obtained a number of exclusive discounts and
options for all testing requirements across all three travel categories. These
include booking a PCR test for arrival into the UK or antigen tests via Qured that can be packed in your suitcase and
done via video call with a doctor at your convenience before departing the
country you are staying. Results come back generally in under an hour and at
around £39 is a cheaper option than the PCR tests and providing they meet the
testing standards, are accepted on arrival into the UK. They also have deals
with Let’sGetChecked,
Randox and many others. Click HERE
for the full list of suppliers and discounts.
Easyjet have teamed up with providers such as Collinson and Randox to provide at home testing where
possible and options for testing at many of the major airports they operate from.
They have a full Covid-19
travel hub on their website with lots of useful information and all the
discount codes for those passengers travelling or holidaying with the airline.
The airline provides useful information on their website of
locations for testing
centres in the UK, in many of the popular tourist countries and those they
fly to on the green list. They have also, like many of the other major
airlines, partnered with Randox
to provide exclusive discount packages for each of the green, amber and red
travel criteria.
Flights and holidays with Jet2 are currently not
recommencing until June 24th at a minimum. The airline is currently
in discussion with covid testing suppliers to be able to provide their
passengers with discounted offers once travel with the airline does restart.
TUI have partnered with Chronomics to provide their
discounted covid testing, for all passengers travelling for a package holiday
with the company. Chronomics are offering TUI passengers covid tests from just
£20 per person.
For those with flight-only option, accommodation only, and
again package holidays, the organisation has vetted and teamed up with Klarity,
Screen4 and Randox
to offer cheaper covid testing for their customers.
We hope you find all this information and links provided
useful in understanding the covid testing process for travel going forward and
remember if you are lucky enough to be taking to the skies and require travel
money for your holiday, be sure to head over to Currency Online Group for the
best rates on the currency market. Get more travel cash for your money and have
that extra drink on us!
©Currency Online Group
28th May 2021