Fixed exchange rates in advance
A Forward Contract is used to fix and thereby guarantee an exchange rate now, for a transfer in the future – in fact, up to two years ahead.
Commonly used by buyers of overseas property, a Forward Contract can be secured with a deposit of typically 10% of the selling currency (usually Pound Sterling), followed by the balance of the remaining 90% on or before a specified date in the future. The buying currency (eg Euros) is then transferred by A Place in the Sun Currency to the account(s) of your choice (directly to your solicitor/notary, or to your own bank account abroad) at the rate initially agreed – with no surprises.
When are Forward Contracts typically used?
When buying overseas property, usually an initial deposit will be payable, with a completion payment of the bulk of funds required some months later. Of course, exchange rates can fluctuate meanwhile, effectively making the price of your property in Pounds change on a daily basis.
To avoid the risk of a falling exchange rate, which would increase the cost of your completion payment, you can use a Forward Contract, and forget about tracking exchange rates.
It’s not unusual for rates to change by 5-10% in a 3-month period, so a completion payment could change by thousands of pounds if you leave things to chance. Using a forward contract removes the risk of your property price increasing beyond your budget – if you wouldn’t buy a property in the UK without knowing the exact price first, why do it when buying abroad?
Are there any risks?
Once you agree a rate with us, we secure the currency at the same time – so if exchange rates improve between then and your completion, your rate won’t improve. However, the reverse is also true – it won’t get worse either! A Forward Contract is a way of fixing your budget in sterling, not a way of guaranteeing the best available exchange rate in the time available.
Example Savings – falling rate
For a €200,000 completion, let’s say you use a Forward Contract to fix your rate and the Pound then falls against the Euro by 5% between then and your completion. You will have saved around £8,500 compared to the price if you had bought your currency just before your completion instead.
Example Costs – improving rate
For a €200,000 completion, let’s say you use a Forward Contract to fix your rate and the Pound then increases against the Euro by 5% between then and your completion. You will have paid around £8,500 more compared to the price if you had bought your currency just before your completion instead.
In addition, once you’ve placed your order, you are entering into a legally binding contract with us. So it’s best to ensure you are definitely happy with our exchange rate before you go ahead – we are operating in a volatile financial market and are usually unable to adjust exchange rates once agreed, even if you are later offered a different rate elsewhere.
Everybody has different circumstances and attitudes to the risk presented by changing exchange rates. We will work with you to give you all the options available, in simple terms, to help you decide what’s best for you.
What if I don’t settle?
If for any reason you place an order with us and then don’t pay for it, we will need to sell the currency you ordered back to the market. Depending on market movement, that could create a loss, which you would be liable for, so it’s best not to place an order if you aren’t sure you want to go ahead for any reason. Please see our terms and conditions or call us for more information.
How long will my money take to arrive?
International payments take longer than domestic payments in the UK. There are a number of variables, and the absolute maximum time it can take is set out in our terms and conditions. We also have to complete internal compliance, anti-fraud and anti-money laundering checks before payments are released, which we will do our best to advise you of in advance in complex cases. Once you have paid us for your currency and these checks are completed, typical payment times are shown below in working days, although we can’t guarantee these because we are relying on a chain of banks to process your payment through to its destination.
The receiving bank may not credit your funds instantly, but we can confirm the date on which they received them.
For Euro payments to the EEA, we use banking facilities in Germany to send your payment, to help reduce or avoid any bank charges at the receiving account. This does not add any extra time to payment processing.
- Euro payments: same day if sent before midday, otherwise next day
- US Dollar payments: same day if sent before 5pm, otherwise next day
- Sterling payments: same day if over £30,000, otherwise next day
- Other currencies: 1-4 working days depending on currency and destination