I am about to put in an offer for a property at the end of this month. I have read in the news about Quantitative Easing (QE), but what is this and how has it affected the exchange rates?
Quantitative Easing is the central bank increasing the amount of money in the system by “printing” more. This does not mean that notes are physically printed; it means that the banks purchase government bonds or other categories of assets, using the new money. The idea is to add more money into the system, which depresses the value of the currency. The hope is to encourage more borrowing and investment in the economy. The Bank of England has agreed to a further £75bn of QE.
Pumping money into the economy will however flood the market with Sterling and this will push exchange rates lower. If you are about to put in an offer it is important to get in touch with a currency specialist. The announcement on the new round of QE has dragged rates down from a six month high. To protect you from a drop in the market, a forward contract is something which can give peace of mind. This is where you can secure an exchange rate for up to two years, and only lodge a 10 per cent deposit. In this way you can avoid a potential drop in rates.