Very large purchase in Euros

[brissleboy]

If I were to purchase a house in France for several million Euros (this is not for me by the way!), have the funds tucked away in a UK bank account, what is the best way of financing this acquisition as obviously it is very open to fluctuations in the exchange rate (other than forcing a Sterling transaction on the seller)?

[ringram]

Get the mortgage in sterling and convert at as close to spot as you can (bank may be able to do this given the value)
Then all your repayments are in sterling, job done.

[brissleboy]

ringram said:

Get the mortgage in sterling and convert at as close to spot as you can (bank may be able to do this given the value)
Then all your repayments are in sterling, job done.

No mortgage, cash purchase, it is eliminating the forex risk that is the main problem here.

[ringram]

You should be able to fix a forward rate if you want certainty and know when you need it for.
Im sure someone will be along to give some recommendations of who to speak to.

[964Cup]

We use WorldFirst for this, but there are several other players such as Caxton. All will give you forward rates, often with some upside benefit as well as downside risk protection. French law makes setting the actual transaction date straightforward, but most of the forward products guarantee you a rate for a period to give you flexibility.

[samrr]

These guys have saved us thousands compared to the banks when exchanging USD or Euros.

http://www.infinityinternational.co.uk

Ask for Matt.

[Sir Bagalot]

I've used www.transfermate.com before but one word of warning for such a large amount.... these firms usually have NO protection

[voicey]

964Cup said:

We use WorldFirst for this, but there are several other players such as Caxton. All will give you forward rates, often with some upside benefit as well as downside risk protection. French law makes setting the actual transaction date straightforward, but most of the forward products guarantee you a rate for a period to give you flexibility.

Big thumbs up for World First from me too.

[brissleboy]

Thanks for the replies everyone, I really appreciate it. Hopefully we can strike a Sterling deal so fingers crossed, will make my life a lot easier if so!

[Mankers]

Or do a series of DCI's (Dual Currency Investments) - one month role, until you reach you € liability date. That way you can earn enhanced yields whilst you wait. Alternatively, if there is an FX level you are happy to convert at set that as the strike and see what the yield can deliver.

[z4chris99]

Afex can help too.

you either convert now, and hold or buy a future

[DonkeyApple]

brissleboy said:

No mortgage, cash purchase, it is eliminating the forex risk that is the main problem here.

There's no forex risk on the cash if buying outright. It's just a cost to factor into the purchase.

The forex risk is on the property asset if there is an intent to repatriate as cash at some point in the future.

There will also be a forex risk on the annual taxes due on a French property unless that property is used to generate a yield in local currency.

Just select 3 big name physical forex houses, sit down and negotiate spread rates for the transaction size. Then open with them and on the day you obtain quotes from them and already knowing the real spot rate you deal at the best rate.

Your actual two main areas of risk lie firstly in broker default. You need to ensure this amount of money is held as seg client money. You also do not transact in one go but in daily clip sizes as this reduces your default risk to negligible and also won't effect your spread costs so long as that is how you agree the deal.

Your second risk lies in why some Brits are getting excited about tip end French properties. They have failed to ask why it is so many are on the market and why the owners are transferring assets out of France. I wouldn't stick a cent into France that I wasn't willing to lose in totality and not is anyone else who is aware of what is going on over there.

[R11ysf]

This seems to be being made far more complex than needed. it's very simple

1. Open HSBC Premier Account
2. Deposit Sterling in to the account.
3. Transfer in to Euros for free and instantly.

No currency risk whatsoever. Just pick the time to change as you see fit. Simples

[z4chris99]

R11ysf said:

This seems to be being made far more complex than needed. it's very simple

1. Open HSBC Premier Account
2. Deposit Sterling in to the account.
3. Transfer in to Euros for free and instantly.

No currency risk whatsoever. Just pick the time to change as you see fit. Simples

what rate do HSBC use? there will be a spread from spot in there, which the OP wants to reduce

[DonkeyApple]

R11ysf said:

This seems to be being made far more complex than needed. it's very simple

1. Open HSBC Premier Account
2. Deposit Sterling in to the account.
3. Transfer in to Euros for free and instantly.

No currency risk whatsoever. Just pick the time to change as you see fit. Simples

Banks can charge up to 200 bp. A few £m would be sub 10bp. So you can see the massive cost difference.

The forex industry thrives on people not understanding that spread is comm and the reduced regs that allow them to claim being comm free.

[R11ysf]

^^^^^^
Nope. HSBC Premier is a private banking service that uses spot rate and between your 2 main currencies all transfers are free.

(Minimum requirements to open an account E.G. 50k balance etc, but if the OP is buying a house then presuming it isn't a gite then he'll easily meet this)

[DonkeyApple]

R11ysf said:

^^^^^^
Nope. HSBC Premier is a private banking service that uses spot rate and between your 2 main currencies all transfers are free.

(Minimum requirements to open an account E.G. 50k balance etc, but if the OP is buying a house then presuming it isn't a gite then he'll easily meet this)

That would imply that they are actually paying their customers to cross.

When we banked with Premier and Expat their rates had an effective comm hidden in the spread of over 120bp. They always used to promote their fx rates as comm free and preferential.

How do they prevent arbing if they have switched to spot and whose spot would they use?

[R11ysf]

DonkeyApple said:

That would imply that they are actually paying their customers to cross.

When we banked with Premier and Expat their rates had an effective comm hidden in the spread of over 120bp. They always used to promote their fx rates as comm free and preferential.

How do they prevent arbing if they have switched to spot and whose spot would they use?

They use spot. The reason being that they are attracting a customer base who have either 50k kicking around in their current account or they have (I think from memory) 10-15k coming in a month. Look it up, honestly there are two or three retail banking things which are great value. This and Metro bank letting you spend money abroad and using spot rate with no fees is another one.

[DonkeyApple]

They only talk about 'preferential' rates on their site, as they used to when we banked with them but discovered that their quotes were a long way from spot. Ironically, their own spot.

[R11ysf]

DonkeyApple said:

They only talk about 'preferential' rates on their site, as they used to when we banked with them but discovered that their quotes were a long way from spot. Ironically, their own spot.

When I used them before I checked it and it was proper inter-bank spot and i don't think anything had changed. I haven't used them for a while but the guys in my office still think it is correct.

HSBC Premier website said said:

2 The exchange rate that applies to any foreign currency debit card payments (including cash withdrawals) is the wholesale market rate used by VISA applying on the day the conversion is made plus our foreign exchange charge, which is currently 2.75% of the applicable VISA wholesale rate. We will make the conversion and deduct the payment from your account once we receive details of the payment from VISA, at the latest the next working day. Details of the current wholesale market rates can be obtained by calling us on the usual telephone numbers. Some cash machine operators may apply a direct charge for withdrawals from their cash machines and this will be advised on screen at the time of withdrawal.

So this seems to say they use wholesale rate for the day, and the other Premier bumf says it is fee free. I'm pretty sure it is as good as they promise, though as I said I haven't used it for about a year.