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How to play the currency game

As anyone who has ventured onto the Continent in the past few months will attest, it’s a pretty painful experience for the pocket. The tide started to turn against the pound in October 2008; by January this year, it had lost 20% of its value against the Euro.

The winners are those who own a property in Europe: the chances are that it’s worth 38% more now, in sterling terms, than two years ago. Foreign-currency experts agree that the tide will change in the coming few months as the economic condition of counties in the Eurozone becomes clearer. With the currencies in a state of flux, what’s the best way to cope?

Cash-in by refinancing

World First (020–7801 3025; says it’s seen the number of clients bringing Euros back to the UK double in the past 12 months. Head of private clients Elisabeth Dobson explains: ‘There are two main reasons why people are refinancing. A lot of second-home owners are refinancing their properties overseas in order to release equity and pay off UK debt. Secondly, overseas property owners and expatriates holding Euros will now be feeling much better off, in sterling terms.

Many people are liquidating assets in the Eurozone to buy property or other investments in the UK as their money is going much farther.’ If you purchased a property outright in France two years ago for €300,000, it would have cost you £200,000. By releasing equity and refinancing with a mortgage of 80% of the value, you would release €240,000. Converting those Euros at today’s sterling-Euro rate will give you £220,183. You would be bringing back more pounds than it cost you to initially purchase the whole asset, but you still retain the asset.

James Hickman, MD of Caxton FX (0845 658 2223;  agrees: ‘It’s a fantastic time to sell and bring Euros back into the country. But we don’t think the rates will stay like this for much longer.’

Reap the rent

Consider renting out your property, as this will enable you to earn income in the same currency as your mortgage. You can then make your mortgage repayments directly from these funds and avoid a currency exchange.

Exchanging small sums

For those who need to transfer sterling to Euros in smallish sums, it’s much better to use an online transfer system (such as Caxton FX’s). Bank transfers can free—the dealer makes money in the exchange rate.

Exchanging larger sums
It’s also possible to buy a forward contract, which enables customers to lock in and secure exchange rates when they place an order without having to outlay the money until the funds are required overseas. Rates for forward contracts can be set up to two years ahead. Mr Hickman doesn’t recommend doing this now as he anticipates the pound will strengthen. However, if you rent out your second home in Europe and are receiving Euros on a regular basis, it would be worth doing a forward contract to benefit from the Euro/sterling exchange rate in the immediate future.

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Miss Dobson says there are also currency option/hedging strategies that enable protection from adverse rate movements, but benefit from favourable rate movements on amounts over £100,000. ‘For example, you can guarantee a worst-case rate for the full transaction amount as well as being able to “participate” in any favourable exchange-rate move should you wish to. An option is like an insurance policy—it gives you the right to buy currency in the future at an agreed rate.’

* Contacts:

World First (020–7801 3025;

Caxton FX (0845 658 2223;

* Overseas properties for sale