Drop in sterling: what does it mean for buyers?

Tuesday, January 29, 2013

Drop in sterling: what does it mean for buyers?

The pound has not had a good January. It's struggling against many of its closest trading peers and is now trading at its lowest level against the euro since December 9th 2011.

Why? The focus has shifted from the ailing eurozone to the weak fundamentals of the UK economy and our widening deficit, coupled with low growth rates.

"Add to this the incoming Bank of England governor, Mark Carney's implied willingness to implement more Quantitative Easing when he takes control in July and the future looks decidedly bleak," suggests William Poole of FC Exchange.

"A bizarre surge of optimism in Europe, coupled with America avoiding yet another debt debacle has forced markets to once again sniff out the weak, and unfortunately the UK economy seems to be winning the ugly sister competition."

So what should buyers do if, this year, they have finally decided they need to snap up that cheap property in Spain, France or Portugal, for example?

Whilst agents suggest buyers should consider seeking mortgages in the local currency, it is hard to second-guess currency movements, but Poole reckons there is certainly more risk that the pound will continue to depreciate than potential for it to improve.

He says many clients are considering forward contracts, which are a "buy now-pay later" way of managing exposure to yo-yoing exchange rates.

"You can lock into a favourable exchange rate today for currency that you need up to two years in the future. All is required is a small deposit."

If the pound is set to drop further this year, and you want to buy abroad this spring, then click here to find out more about how you can make exchange rates work for you, at FC Exchange's website.


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