Baydonhillfx has worked in partnership with Bradleys International for many years offering a full range of foreign exchange services to clients looking to purchase property overseas. There are no fees or commissions to pay on transactions over £5000. Baydonhillfx offers fast online registration, access to an experienced, dedicated foreign exchange dealer and security by way of segregated bank accounts. As brokers, Baydonhillfx relies on the difference between what currency can be purchased and sold for and can often save clients up to four per cent on exchange rates compared with high street banks.

An increasing number of private individuals are looking to purchase a property overseas, or already own a property abroad. If you fall into one of these two scenarios then you are likely to be exposed to the currency markets. Within the last twelve months to the end of 2009, Sterling has experienced a peak to trough movement of 13%. To put that into context an overseas property valued at €200,000 would have cost around £194,174 at the worse rate of exchange and £169,491.52 at best. That is a cost or saving whichever way you look at it of £24,683.

Several factors influence currency markets including market speculation, economic outlook and data releases, interest rate yield differentials and political events to name but a few. Rates of exchange are constantly changing by the minute, hour & day etc and because of this changing dynamic the cost of purchasing an overseas property for example in Euros which is a fixed price is not known in Sterling as the rate of exchange moves up and down. Most property transactions operate within a three month window so the price agreed on day one in Euros could result in a Sterling price far removed from the estimated budget.

This same challenge exists for those who already own an overseas property and have a foreign currency mortgage to pay and are faced with ever changing exchange rates. Not knowing from one month to the next how much that Euro mortgage will cost in Pounds can be very frustrating.

Thankfully there are several ways in which you can manage the inherent currency risks involved in purchasing overseas property. One way would be to purchase by way of a forward contract. This type of contract allows purchase of a foreign currency at a price derived from today’s spot market to a designated point into the future at a guarantee rate of exchange. A deposit typically 5%-10% is normally required to secure a forward contract. This type of contract guarantees a rate of exchange for up to 24 months into the future. The upside of a forward contract is that once entered into, and a rate of exchange has been guaranteed, should the value of the currency fall then you are protected from that fall. A forward contract would also help with cash flow as only the deposit is required with the balance due only on the maturity of the contract which could be up to 24 months into the future. The downside of this contract is the reverse. Should the value of the currency appreciate then you would miss out on the gain because of the commitment undertaken to purchase at a guaranteed rate of exchange.

Another way of managing the risk is to place a limit or stop loss order with a foreign exchange dealer at Baydonhillfx. A limit order is an instruction to purchase currency at a pre determined price. The foreign exchange dealer will then be your eyes and ears into the market and should the currency price hit your target then the dealer will execute the transaction. The reverse of this is also applicable and steps should be taken to limit any downward lurches on a currency price by placing a stop loss order.

The vast majority of overseas property deposit payments are covered by way of a spot contract. A “Spot” contract is an immediate purchase of currency to be settled and delivered within a few days.

Baydonhillfx also offers a regular overseas monthly payment protection (OMPP) contract for up to 12 months. This contract is designed for people with overseas mortgages to pay or pensions to be converted into foreign currency. This is a forward contract covering up to 12 monthly payments at an agreed rate of exchange. Each sterling payment is drawn via a direct debit on the preferred day of the month and once cleared the foreign currency is deposited in a bank account of choice. Most people who either own or are looking to purchase a foreign property will open a bank account in the local currency enabling these transactions to take place.