Quite simply through helping you achieve a better exchange rate. When you buy a property abroad, the natural inclination is to purchase your currency through your bank; however this is usually a very expensive way of doing it. The exchange rates offered by banks are not very competitive, and a currency broker can achieve rates that can be up to 5% better than available at the bank. Given that a transfer to purchase property will usually involve a sizable sum to be converted, the savings can be considerable. For example, just a 2% difference in the rate when buying €200,000 will save you around £3,500.
The current volatility of the euro is making people unsure about transferring pounds to euros. What strategies/solutions do currency brokers offer customers?
There are various strategies and solutions a currency broker can offer to help make the most of your currency. The current volatility in the market is making a big difference to any clients that need to convert funds between Sterling and Euros, and with a good knowledge of the products a broker can offer, it's possible to take control of your currency requirement and not simply leave things to chance.
For example, a broker can offer a Forward Contract. This is where the moment you know you will have a requirement to buy currency, you can lock in the current exchange rate, even if you don't need your funds for up to two years. You simply pay a 10% deposit of the total you need to convert, and you then know the exact cost of your Euros. Whilst this will not allow for gains to be made should the exchange rate move in your favour, it does allow you to budget effectively and be protected against any adverse exchange rate movements, safeguarding your rate and allowing you to budget.
Other tools brokers can offer are 'Stop Loss' and 'Limit Orders'. A stop loss order is an instruction to buy should rates drop below a pre-agreed level, e.g. €1.13. This gives you a worst-case scenario of how much your currency will cost, while allowing you to take advantage of any gains should rates rise. A limit order is an order to buy should rates rise to a pre-agreed level e.g. €1.18. Using these types of tools can help you make the most of your currency within your timeframe.
The alternative is leaving things to chance and simply hoping rates will move your way; hope is not a reliable economic tool and so by using a currency broker to employ the strategies above, it allows you to budget effectively and take control of the cost of your home overseas.
How can currency brokers help expats living abroad?
Expats living overseas will usually require regular transfers to cash in on a salary or pension income. Most brokers will offer a regular payment plan that helps move these smaller sums at a better rate and with lower charges than using the bank. Recent research by the Foremost Currency Group showed that sending €1,000 per month using the Regular Payment Service would save you nearly £10,000 over the course of 10 years, compared to doing it with the bank.
What will happen if Greece, or any other PIG, is forced out of the Euro?
Technically if a country such as Greece were to leave the Euro, they would simply revert to their own currency and things would continue as normal. In reality however any newly created currency could rapidly depreciate as inflation would spiral out of control. There would likely be a run on the banks as customers rush to withdraw their funds to ensure their security. This could have a knock on effect on the wider Euro area, ruining confidence in the Euro and weakening the single currency further. It would be a very bad thing for the global economy should this scenario become reality, and so for the moment we expect the IMF and ECB to step in to support any failing economy, as the alternative would not be good for any economy tied to the Euro.