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Sunday, 9th June 2013
A sudden currency slide could seriously dent your wealth. We look at the best tactics for spenders and investors
HOLIDAYMAKERS and those who own property abroad are being urged to lock in to exchange rates ahead of an expected fall in the pound this month. Investors, meanwhile, are looking to profit from sterling weakness by backing UK exporters.
Morgan Stanley, the investment bank, expects the pound to dip to €1.09 by the end of this month from €1.18 and remain subdued, rising to only €1.11 by the third quarter of this year. It is not expected to recover its current position until about the third quarter of 2014. Against the dollar, the pound is forecast to fall to $1.48 this month, from $1.55.
The pound got a short-term boost last week after better-than-expected data from the services sector, but its slide is expected to resume because of wider economic uncertainty and the prospect of further money printing measures by the Bank of England.
Alan Higgins, UK chief investment officer at Coutts, the private bank, said: “The near-term UK growth outlook remains weak, suggesting additional monetary stimulus is likely. We forecast some extension of recent sterling weakness.”
The pound is down 5.2% against the euro over a year and 0.7% against the dollar. Against a broad basket of currencies it has fallen 3.5%, according to the Bank of England.
It is not all bad news, however. Sterling has strengthened against some currencies, said Travelex, the foreign exchange dealer. Changing £500 will buy 13% more South African rand and 12% more Egyptian pounds than a year ago.
With sterling expected to fall, consider locking in rates now. This can be done using a pre-paid card, offered by firms such as Fair FX, Travelex, the Post Office and Virgin Money.
Customers load money onto the cards — typically euros or dollars — and can use them without the need to worry about further currency fluctuations. Some, such as the Travelex Multi-Currency Cash Passport, allow travellers to load up to seven currencies, including the rand and the Canadian dollar.
Most do not charge commission when money is loaded onto the cards, but the providers profit from a margin over the exchange rate. It is worth checking the website for each of them before you sign up to ensure you get the best rate.
Last week Fair FX offered a tourist rate of €1.146, while Virgin offered €1.105, according to travelsupermarket.com, the comparison site. The market exchange rate was about €1.18. Loading €1,000 onto the Fair FX card would have cost £872 compared with £905 for the Virgin card.
Better exchange rates are offered by Norwich & Peterborough building society’s Gold Classic debit card, which is free to use abroad. Spending €1,000 on purchases cost £850 last week, according to Travelsupermarket. The disadvantage is that you cannot lock in rates, so you may lose out if the pound weakens. The card is available only to Gold Classic current account customers.
Monday 10 June 2013, 09:47am
Saturday, 8th June 2013
British holidaymakers are predicted to waste more than £327 million this summer in overseas credit card charges, while millions more will go down the drain in unnecessary debit card fees.
There is no doubt taking plastic abroad is safer and more convenient than carrying large amounts of cash but – depending on the card you choose to take – it can be needlessly expensive.
Someone spending £100 on a debit card could be charged £4, while using a credit card for the same purchase would cost a total of £102.75 – provided the debt was cleared during the interest-free period.
Debit cards are generally cheaper than credit cards for cash withdrawals though, with a typical charge of 2% on top of the transaction fee, and no interest costs.
But Michael Ossei, at uSwitch.com, which produced the £327m estimate, said: "With some planning ahead, it is possible to escape the hefty charges.
"The simple rule is if you want to use a card on holiday, use a credit card for spending and a debit card for withdrawing cash. There are credit cards on the market that charge no transaction fees when you use them abroad – these are the ones to go for."
According to independent comparison service Moneyfacts.co.uk, the Halifax Clarity MasterCard credit card is one of the cheapest for overseas use. There are no transaction or cash handling fees and the interest rate is typically 12.9% for purchases and cash withdrawals.
Saga's Platinum Visa card has no transaction fees, a 2% cash handling charge and a typical rate of 11.9% for purchases and 21.47% for cash withdrawals.
The Post Office offers cards without transaction fees that charge 2.5% for cash handling and have interest rates of between 16.9% and 19.9% for purchases and 26.9% for withdrawals, while Nationwide Building Society charges a better than average 2% transaction fee, 2.5% for handling, 15.9% purchase interest and 27.9% withdrawal interest.
Another option is to take a prepaid currency card, which you load with cash before leaving home and use in the same way as a credit or debit card until the money runs out.
Ian Strafford-Taylor, chief executive of provider FairFX, said: "Prepaid travel cards are the leading option in pre-holiday saving and budgeting, as they combine great exchange rates with the flexibility to load currency at any time.
"One of the many benefits of the card is that it can effectively provide a spending cap for your trip." Choose a prepaid card with no transaction fees and the lowest combination of charges for set-up, foreign exchange and cash withdrawals depending on your likely spending pattern.
The only cost for Caxton FX's Euro card is the variable exchange rate, while the FairFX Anywhere card charges 1.4% on transactions and £1 for cash withdrawals.
Endsleigh's Sterling card costs £14.95 to set up and £1 per cash withdrawal, with no exchange or transaction fees. The Post Office's Sterling card has a 3% exchange fee and charges £1.50 for each cash machine use, while the sole charge for Travelex's Sterling or Euro Cash Passport is a foreign exchange fee of 5.75%.
The cost of spending £500 spread across six £50 purchases and four £50 cash withdrawals would depend on the exchange rate offered by Caxton FX, while it would be an extra £11 with FairFX, £18.95 with Endsleigh, £21 with the Post Office and £28.75 with Travelex.
With a typical debit card, a similar spend could cost £25.25, while with an average credit card it might be £23.75, including interest charges of around £4 on the cash.
For more information about prepaid and travel credit cards, visit a comparison site such as Moneyfacts.co.uk or MoneySupermarket.com.
As well as taking two different forms of plastic to keep down costs, and in case one is lost or stolen, it is wise to carry some cash for smaller purchases where cards are not accepted.
To get the best deal on taking cash abroad, Mr Ossei advised: "Make sure you take both exchange rates and commission rates into account. This will normally involve ordering your currency and collecting it before you travel.
"Avoid changing currency at the airport or straight from your debit card, as commission fees could cost you those well-earned poolside drinks."
Monday 10 June 2013, 09:37am
Sunday, 2nd June 2013
Nearly half of British tourists are wasting millions of pounds in card transaction charges on holiday because they do not understand the fees levied when bills are converted into sterling from local currencies.
When customers pay at hotels or restaurants or use a cash machine abroad, they are often offered the chance to pay in sterling instead of local currency. However, tourists who pat in this way will face a charge, which is levied by retailers on debit and credit cards The charge is typically 4pc of the value of the purchase, and is totally legal.
Few people know about it the charge. Caxton FX, a currency exchange company, said more people than ever were being caught out. According to its research, 42pc of Britons are paying over the odds by using a “dynamic currency conversion” (DCC), a 13pc increase since 2011. The company believes that this could cost consumers as much as £292m this summer.
James Hickman, managing director of Caxton FX said: “A lack of confidence with foreign currency is seeing the number of people caught out by DCC increasing year-on-year, and the extra 4pc charge on every transaction could add up to some serious cash over the course of a two-week holiday – as well as some worrying bank statement statements when people return to the UK.
“However, DCC is a perfectly legal charge so it’s up to the individual to make sure they are not being caught out by this.”
One in 10 British tourists admitted to using their debit or credit card for all transactions when abroad as they didn’t understand the local currency.
Mr Hickman said: “The ubiquity of chip and Pin means that using cards abroad is a sensible option for many travellers who would rather not carry wads of cash around on holiday or who struggle with making sense of foreign currency. However, debit and credit cards all come with associated costs which, when coupled with DCC, can add up significantly.”
Making sure you have the best credit or debit card to use abroad can cut costs considerably, while a credit card has the added benefit of protection if your purchase goes awry.
Most banks and card issuers add a foreign usage fee to cash and purchase transactions. In addition to this, credit card cash transactions cost even more. The best credit cards for using abroad include the Halifax Clarity card Metro Bank’s card and the Post Office card. You could also use a prepaid card, which is chip-and-Pin protected but spate from your bank account. Many of these cards have lower feeds than all but the best credit and debit cards. Try cards from FairFX or Travelex’s Cash Passport.
Monday 03 June 2013, 10:00am
Monday, 3rd June 2013
If you're off on holiday, a prepaid currency card can be a useful thing to pack. We take a closer look at some of the best ones on the market. If you're going abroad, you don't just have to rely on your credit card or bank debit card to pay for things. You could use a prepaid currency card instead and leave your normal plastic at home. The great thing about these cards is that you can simply load up your card with funds and away you go. Then, if your funds run out, you can simply reload the card.
What’s more, unlike the majority of credit cards and debit cards, in many cases, prepaid currency cards won’t charge you to make cash withdrawals overseas and you won’t always be charged a foreign transaction fee either when you use the cards in shops and restaurants. So let’s take a closer look to see how some of these prepaid currency cards compare. In this article, we're looking purely at charges as currency rates fluctuate.
We're looking at euro, dollar and Sterling cards. Euro and dollar cards are fairly self-explanatory, as they are designed for use in the eurozone and the US. Sterling cards can be taken anywhere in the world and your money is exchanged from Sterling into the local currency each time you transact using the card.
One important thing to note is that cards that don't charge fees generally have a poorer exchange rate than those that do. You can compare rates on some of the cards mentioned in this article at the Timedial website.
Ice Travellers Card This prepaid MasterCard is available in Sterling, euro or dollar versions. Which? says the sterling version has beaten euro and dollar cards when looking at a combination of exchange rate, loading and ATM fees. There are no withdrawal, foreign transaction or top-up fees on all of the cards, with the exception of the Sterling card, which has a 1.85% top-up fee. You also earn 1% cashback on all purchases made with one of these cards.
FairFX Currency Cards FairFX offers three different pre-paid currency cards – the Anywhere card, the Euro card, and the Dollar card. It has its own exchange rate, compared to most other cards which use MasterCard's, and it's generally pretty competitive.
The Anywhere card allows you to load up with Sterling. If you load over £500 onto the card initially then the card is free, but if it's less than that amount the card costs £9.95. There are no further loading charges once you have the card.
With the Anywhere card, you'll be charged £1 for every ATM withdrawal you make and a 1.4% foreign transaction fee for purchases you make. The best prepaid cards for spending abroad.
On the flipside, the Euro and Dollar cards can only be loaded with either euros or dollars and these offer a fixed exchange rate – so if you decide to load your card when the exchange rate is strong, you can keep that rate on the existing money on the card (so it won’t be impacted if the pound weakens, for example). There are no transaction fees for using the cards abroad, but there IS a fee if you withdraw money from an ATM – €1.50 or $2 respectively.
Read the full article here
Monday 03 June 2013, 08:58am
Thursday, 30th May 2013
Getting a prepaid card is simple enough - but watch out for the currency you choose - as some work out cheaper than others.
For those heading abroad, deciding the best way to pay for things while trying to clampdown on run-away foreign exchange fees, can be a big pre-holiday headache. For some, using a prepaid card as an alternative method of payment to credit and debit cards may be an option.
Prepaid cards are a good alternative to traditional credit or debit cards when travelling abroad - you simply choose a provider, load cash onto it - whether in sterling or another foreign currency - and use it like a credit card to pay for things while abroad. Prepaid cards are:
Issued under Visa or Mastercard, and generally accepted in the UK and abroad; Can be loaded with cash from ATMs, over the internet as well as from the provider and the Post Office;
Are NOT protected by Section 75 of the Consumer Credit Act, so anything you buy with a prepaid card won't have the same protections as if you purchased the goods with a credit card.
Sterling or euro/dollar cards?
According to consumer group, Which? you could be better off with a sterling prepaid card rather than a dedicated euro or dollar prepaid card.
Which? tracked exchange rates on offer from sterling, euro and US dollar prepaid cards over a six week period and found that the best sterling prepaid card beat their euro and dollar counterparts when comparing their exchange rates, loading and ATM fees. The report showed that spending 500 euros on the best sterling prepaid card cost £5 less than on the best euro prepaid card and £3 less than the best dollar prepaid card on $500 spend.
Best sterling prepaid cards
The Which? investigation picked out the two best sterling prepaid cards in the market. Which? said: "ICE's sterling Travellers Cashcard consistently offered the best option. The sterling prepaid card charges no foreign exchange mark-up on the MasterCard exchange rate, no foreign ATM fees and a 1.75% debit card load fee. The Travelex Cash Passport Globe and Caxton FX Global Traveller offer the next best options, charging no debit card loading fees or foreign ATM fees.
"FairFx's Anywhere card and My Travel Cash also offered competitive sterling card options matching the best on offer from dollar and euro prepaid cards.
"If you are unlikely to withdraw money abroad, FairFx's Anywhere card offers one of the best options with a low 1.4% mark up on the exchange rate, but it does charge a £1 ATM fee."
Remember that using your debit card abroad could mean that you get hit with a double whammy of charges.
Friday 31 May 2013, 10:35am
Thursday, 30th May 2013
How we're wasting £500m on card fees and charges each year - here's our guide to stop getting ripped off by poor deals on plastic and foreign currency
Brits are paying way over the odds for their travel money by more than £500 million each year, according to research by Mirror Money.
With the school summer holidays fast approaching, millions will be planning their family fortnight in the sun.
It’s already been bad news for UK holidaymakers this year as the exchange rate for euros and US dollars is well down on those offered in 2012.
That makes it even more important that travellers don’t get ripped off by poor deals on plastic and foreign currency.
A family on a two-week trip abroad could easily save up to £50 on travel spending just by understanding the options available to them. Research by uSwitch.com says credit card charges alone will set consumers back £327million this summer.
Many travellers do not know where to go for the cheapest money deals.
The mind-boggling array of cards and different charges is a minefield and often means people end up spending too much of their holiday budget on card fees.
Sadly, it’s not until people get home and read their bank statement they realise just how much they’ve wasted on charges.
We’ve been doing some digging to help you find the best options when it comes to choosing a card and buying your holiday cash. We also highlight the most expensive – so you know which ones to avoid.
If you use a credit card overseas be aware that most banks will add on a foreign usage fee to cash and purchase transactions. In most cases these charges are around 2.75% to 2.99% of the amount spent, however a few cards offer a better deal (see table, opposite).
If you only use your card for making purchases in shops and restaurants that’s all you’ll pay on top, but for cash transactions on a credit card it’s even more expensive.
In addition to the foreign usage fee, most credit card cash transactions will cost you an extra 3% on top, so an ATM withdrawal of £100 worth of euros or dollars can easily set you back a combined charge of around £6, so best avoided unless it’s an emergency.
Good Value – Halifax (Clarity), Metro Bank, Post Office & Saga
Expensive – American Express, ASDA and HSBC
Whichever card you take abroad, it’s worth spending a couple of minutes to check what the charges are for your particular plastic.
At least if you understand the costs, you can adapt your spending pattern accordingly – for example, you don’t want to be making lots of small cash withdrawals or purchases of £10 or £20 if you’re going to be hit with charges of £1.50 each time. While these costs don’t sound much in isolation, if you look at a typical holiday scenario below, you see the charges soon add up.
A secure and convenient way to pay on your hols but the overseas fees and charges vary greatly from card to card. Check our table to see how your bank stacks up. We use our debit cards more and more and tend to take them for granted, especially when they don’t cost anything to use in the UK.
But it’s a different picture abroad, something holidaymakers often don’t realise until the charges hit.
As with credit cards, there is a usage fee for debit card purchases and cash withdrawals (2.75% to 2.99%) plus an ATM withdrawal charge typically between £1.50 and £2.
The charge that catches most people out is the debit card transaction fee where, as well as the 2.75% or 2.99% usage fee, some banks hit you with an extra £1 to £1.50 per transaction, regardless of the amount.
Good Value – Metro Bank, Coventry BS, Nationwide BS, Norwich & Peterborough BS.
Expensive – Halifax, Santander, NatWest/RBS and Lloyds TSB.
Prepaid currency cards
Often a cheaper alternative is a prepaid currency card, which you load up before you go. It’s totally separate from your bank account.
They are chip and PIN secure, accepted wherever you see the MasterCard symbol and offer a cheaper way to pay than many debit and credit cards.
Good value – FairFX Anywhere and Travelex Cash Passport Globe.
Expensive – Post Office Travel Money Plus.
There are two types of prepaid currency card. With a sterling prepaid card you transfer money on to the card in pounds. You use the card to make purchases or withdraw cash and the exchange rate at the time of each purchase or transaction is used to convert the money from your card. The fees for cash and purchases tend to be cheaper compared with credit and debit cards, as you’ll see from the table.
With a single-currency prepaid card you can choose euros or US dollars (other currencies including New Zealand dollar, Canadian dollar and South African rand are available from Travelex).
You transfer your holiday money to the card and it is converted using the exchange rate on offer that day.
You then don’t have to worry about the exchange rate as you already have your euros or dollars locked in.
Where to get the best deal on foreign currency Never buy or exchange back your currency at the airport unless it’s an absolute emergency, because you’ll end up paying well over the odds either via a poor exchange rate, high commission charges or a combination of both.
You can order currency online and arrange for it to be delivered to your home – plus many providers don’t charge if you order £500 or more worth of currency.
Beware of an increasingly common practice where a retailer or ATM lets you pay in sterling, known as Dynamic Currency Conversion (DCC).
While it may seem a good idea that you know exactly how much you’ll be debited in sterling, the disadvantage is that it gives them the chance to use a poor exchange rate which could see you paying way over the odds, in some cases by 4%.
Even though most card issuers charge a 2.75% to 2.99% loading fee, paying in the local currency is nearly always the best option.
Before you take off, check your current account balance and your credit card balance and limit.
Check your credit and debit card won’t pass their expiry date while you’re away.
Tell bank and credit card company you’re away or they may think transactions are fraudulent and may stop your cards.
Take a spare credit card with you as a backup, and keep it in the hotel safe.
Take your travel insurance details.
Keep a photocopy of of cards, passport and travellers cheques to help replace any lost or stolen ones.
Friday 31 May 2013, 09:04am
Wednesday, 29th May 2013
Holidaymakers must act now to avoid sneaky fees that can add hundreds of pounds to the cost of trips abroad.
The charges on different credit and debit cards vary so wildly that the most expensive add £56 to typical family spend on holiday.
You can dodge this rip-off by signing up to the right current account, credit or pre-paid currency card. Filling in the forms, getting approved, and the card arriving can take several weeks.
At the very least, you should compare the options already in your wallet and make sure you use the cheapest on your travels.
Our research is calculated for a typical family spend of five cash machine withdrawals of £100, five purchases in shops at £25 a time, and four £100 meals in a restaurant — a total of £1,025.
Card providers use the foreign exchange rate decided by Visa or Mastercard. But another 3 per cent is often charged simply to convert your pounds into local currency, often alongside a usage fee of £1.50.
That adds £4.50 for each £100 spent. Using a cash machine can add another 2 per cent to the cost.
The most expensive mainstream card is the Lloyds TSB debit card, which will cost £53.64 for our typical holiday spend, based on figures from comparison site Uswitch. It has a 2.99 per cent exchange-rate fee, plus £1 on every purchase. ATM withdrawals cost up to £4.50 extra. If you live in London, cut costs by opening a Metro Bank account, which has no fees on foreign use.
Norwich & Peterborough offers the same deal on its current account, which is free if you pay in £500 a month or have a balance of £5,000, otherwise a £5 fee applies.
Nationwide is another cheap option. Its fee for changing money is 2 per cent and there is no card-usage fee. Cash machines cost a further £1 to use.
The dearest credit cards are Virgin Money’s Balance Transfer Card and MBNA Platinum Credit Card, according to USwitch. They add £55.65 to the typical spend. There is 2.99 per cent to pay on currency exchange and another 5 per cent (minimum cost £5) if you use an ATM. And the interest is around 17 per cent if you fail to pay off the bill in full at the end of the month.
The Halifax Clarity card, Metro Bank credit card, or Saga Platinum card (over-50s only) are better. All offer free currency conversion and no extra charge at cash machines. But Halifax levies interest on money taken from an ATM at a minimum of 12.9 per cent, even if you pay off the balance on time. This works out at around £1 a month on each £100. Post Office Platinum MasterCard has no purchase fee, but costs 2.5 per cent (minimum £3) at cash machines. Nationwide’s standard credit card costs 2 per cent at card-readers in shops and restaurants and another 2.5 per cent (minimum £2.50) at cash machines. The overall cost is £33 on our family spend.
Nationwide’s Select card, reserved for its current account customers, has no fee in shops and restaurants, but a £3 minimum charge on cash machine withdrawals. Total costs were £15 in our test.
Steer clear of the First Direct Credit Card, American Express Platinum Cashback and Marks & Spencer Credit Card. All tested poorly in our research, with 2.99 per cent charged on purchases, another 3 per cent at the cash machine, and a total cost of £45.65 on our analysis.
A good alternative to your bank debit or credit card is a pre-paid card. There are two types. The first you load up with a specific foreign currency before you go. This can work out well as you can lock into an exchange rate. The other you load up with pounds sterling, then convert to any currency abroad. The exchange rate is decided on the day. The FairFX Sterling Anywhere card has one of the lowest charges on purchases at just 1.4 per cent. It costs another £1 each time you use a cash machine outside the UK. So, total charges are £19 in our typical spending scenario.
Thursday 30 May 2013, 01:46pm
Tuesday, 14th May 2013
Families who want to holiday over the half term will be forced to fork out up to 50 per cent more than they would the week before the school holidays, says Holiday Extras’ travel expert Lindsay Garvey Jones.
A rise in demand will raise prices unless accompanied by increased supply, which explains why the price of some packages have soared during the half term. Families have no choice but to travel during the school holidays, so it’s important to make savings where they can.
Parents shouldn’t be discouraged by the half-term price hike, because the family holiday can be made more affordable. Here are some of my money-saving tips.
Discount codes and cashback sites. Find promotional codes on sites like Discount Vouchers and Voucher Codes, and earn cash back from participating retailers through websites like Quidco and TopCashBack.
Book airport parking in advance. Meet and Greet parking is the most stress-free service for families – and with savings of up to 60 per cent with Holiday Extras, it’s inexpensive too. A chauffeur will be waiting to whisk the car away at departures, and have it ready at arrivals for the return. Eight days’ Meet and Greet parking at Gatwick starts from £64.99.Spread the cost.
Many tour operators and travel agents offer the option to spread the cost of a holiday through monthly or a set number of payments. It will make paying for the holiday manageable.
Use an agent to search out the best deal for you. Agents on the high street and online can give you expert advice and thorough aftercare. They will search for the best deal to suit your budget and needs, and pass on any savings. They can add value to your experience, especially as they sometimes promote special 2 for 1 deals, seat sales or know the best way to save money.
Holiday insurance with free cover for kids. Under-18s go free on all of Holiday Extras’ award-winning travel insurance policies. A week’s European cover for a family of four starts from just £22.26.
All-inclusive could cost less. The upfront cost of an all-inclusive holiday can be off-putting, and a cheaper self-catering or half-board option often takes precedence. However, when the cost of food, drinks and treats for the kids are added up, an all-inclusive package can work out a whole lot less.
Don’t rely on last-minute money. Buying foreign currency at the airport is a sure-fire way to a bad exchange rate. Order travel money online or opt for a pre-paid currency card – like FairFX – which is safer and can offer some of the best exchange rates on the market.
Do destination research. Knowledge is power, and a little planning could save pounds. Booking tours and activities with a UK travel agent will often be more expensive, so arrange day trips with a local guide or tour operator. Be aware of the going rate and use this as a haggling tool.
Buy before you fly. Stock up on essentials like sun cream – they cost more overseas. A family of four can go through a bottle each during a week’s holiday, so take advantage of offers and 3-for-2 deals when you see them. And don’t forget to pop them in your case!
Choose a hotel with a kids’ club. Parents can save forking out on activities for the children – most kids’ clubs offer free all-day-long entertainment.
Thursday 16 May 2013, 08:48am
Friday, 3rd May 2013
Currency exchange rate fluctuations are one of the biggest bugbears for expats making payments across different currencies. Many expats fail to pick up a good exchange rate because they do not shop around and stick with the big banks.
Ian Strafford-Taylor, of money broking firm FairFX, says that another issue is that because of currency fluctuations, the expected regular payment becomes an unknown amount every month. One solution could be to use a currency broker offering a regular payments service which will carry no transaction fees and generally have a better rate of exchange than a bank offers. This service can be used for paying a mortgage, pay regular bills and even to send home rent income and have a salary and pension payments transferred cost-effectively.
Fixed exchange rate
In addition, someone using the service could fix their exchange rates for a full year ahead. The bigger currency brokers will also, unlike banks, allow their customers to set up direct debits. This method could, says currency brokerage HiFX, save a small fortune – and with some banks charging up to £30 per transaction there is a huge saving of several thousand euros a year to be made.
Mr Strafford-Taylor of FairFX said: “Setting up a direct debit at a fixed exchange rate could save money but in reality many of our customers choose have their currency broker contact them every month to confirm the amount and delivery details.”
Expats with mortgages will be moving money every month and up until 2007, when the financial crisis hit, there was a wider choice of banks willing to deal with expats. Unfortunately that’s not the case now and the same goes for an expat looking to buy a property with a mortgage.
While some lenders are looking for expat custom, they aren’t always a cheap option with some demanding a minimum £150,000 price or a minimum loan value of £100,000 with a 25% deposit too.
However, one firm based in France says seen a sea-change in recent years with expats choosing to find a French lender rather than one in the UK.
John Busby, a director at French Private Finance, has found expats increasingly looking to remortgage and previously they had avoided French lenders because of the costs and registration tax involved, which could add up to a costly 2.5% of a deal.
He said: “The numbers involved have become more interesting because the rates for mortgages are at historic lows and it makes sense to get a French mortgage.”
Friday 03 May 2013, 12:17pm
Tuesday, 23rd April 2013
Buying a home, whether back in the UK or in your new home country, is the biggest financial commitment many expats will make.
Whether you are buying outright with savings or with the help of mortgage finance, you are likely to have to move money from one currency to another.
If you've got a mortgage, you may be moving money every month from one currency to another. While you could use a bank to do this, there is likely to be a cost involved; not only will there be transaction fees but you may not get a great exchange rate. Currency brokers usually offer a service that allows regular payments to be made quickly with no transaction fees and a good exchange rate.
Ian Strafford-Taylor, chief executive of currency brokers FairFX, said: "One issue with regular payments abroad for mortgages, either outbound from the UK into a foreign currency or inbound from a foreign currency, is that the amounts are almost certainly going to vary from one month to the next, given that the exchange rates will move.
"To combat this, it is of course possible to set up a direct debit, although in practice most customers choose not to go down this route. Many customers prefer to have their currency broker contact them each month to reconfirm the payment amount and delivery details; a service which all brokers are happy to offer."
Regular payments can also be used to meet home maintenance costs and to repatriate rental income, as well as non-property related expenses such as pension and salary transfers.
Unlike banks, larger currency brokers will also allow customers to automate their payments by direct debits and fix their exchange rates for up to 12 months ahead if they wish. This means customers know exactly how much is transferred every month. According to currency broker HiFX, customers can save up to £300 on transfer fees alone by using direct debit, as the banks charge transfer fees of up to £30 on every transaction. They also save on bank commission and receiving fees from overseas banks.
Mark Bodega of HiFX said: "Depending on the amounts a client is sending they could save thousands of euros a year on bank charges alone."
Getting a mortgage for an overseas property may be a harder matter than sending money to pay for it, however.
Tim Harvey, managing director of Offshoreonline.org, said: "Prior to 2007, expatriates had a wide range of choice – brands such as Lloyds International, Bank of Scotland International, BM Solutions, Halifax, Cheltenham & Gloucester and even some regional building societies would all look at expat business favourably.
"The Halifax Bank of Scotland collapse and their subsequent takeover by Lloyds has been a disaster for expats, with at least five lenders being forced out of the market after they were all taken over by Lloyds, who then stopped new lending activity in the market in 2012."
While there are still lenders active in the expat business, they can make heavy demands – a minimum purchase price of £150,000, a minimum loan of £100,000 and a deposit of at least 25 per cent are common requirements.
John Busby, director of French Private Finance, said there has been a recent rise in the number of expats with homes in France choosing to remortgage. What's unusual, said Mr Busby, is that it is not usually worth going to the bother of remortgaging in France due to the costs of bank fees and mortgage registration tax, which usually amount to 2.5 per cent of the amount being refinanced. The French tendency to offer good long-term fixed and tracker mortgage deals also means there has been little point in the past in remortgaging. However, he said, the situation has changed.
"Now that French mortgage rates are at an all-time low, the numbers have become more interesting," he said.
"If you have a mortgage with more than £100,000 outstanding and can find a long-term mortgage offering a rate a percentage point lower than your current rate, it does make sense."
He said that expats who want to remortgage in France will usually need to have at least 30 per cent equity in their home, but once the costs have been taken into account it should be possible to save around €10,000 for every €100,000 refinanced over 20 years.
Wednesday 24 April 2013, 08:32am
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