Sterling slumped to a fresh all-time low against the Euro in early November, further to the Bank of England’s shock 1.5% interest rate cut and a raft of negative economic news in the UK.
For buyers of property in France, Spain or elsewhere in the Eurozone, that means spending more for the same amount of Euros than before.
Exchanging currency for a €200,000 property would have cost around £141,000 a year ago, wheras now a UK buyer would need to fork out over £165,000.
Why the change in currency value? Quite simply, the UK economy heading into recession means that investors are less likely to hold assets in sterling, which means less demand for the Pound and therefore falling value. Add to this falling interest rates, lower inflation for producers and consumers, falling house prices and a stuttering economy, and it’s easy to see why sterling has taken such a beating in recent months.
There is some good news though. Eurozone property prices have also been tumbling, so negotiating a good price should be much easier than a year ago. There are less buyers around and properties are harder to sell, so make sure you get yourself a good deal.
Also, with global interest rates falling, if you are using an overseas mortgage to buy your place in the sun, financing may well be cheaper.
Finally, don’t forget that you can fix and guarantee your exchange rate up to 2 years ahead by using a specialist broker like Currency Index. As the Bank of England itself expects tough economic conditions through 2009, it’s hard to see the Pound recovering, and there may be worse times ahead. By fixing your exchange rate for a purchase or completion next year, you can safeguard against falling exchange rates and make sure your dream overseas purchase doesn’t become a nightmare
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