“QE Not Good News For Overseas Property Buyers.”
Posted on:
10
Feb
2012
by James Farmer
Do you have clients with overseas property? or clients looking to buy?
Robin Haynes, MD of FSA regulated and award-winning Currency Index comments on yesterdays QE announcement:
“The Bank of England’s £50bn extension to its quantitative easing (QE) programme today is not good news for overseas property buyers. Injecting more money into the economy has the effect of diluting sterling, and the Pound tends to suffer, giving us lower exchange rates for sending money abroad.
“Sterling is particularly vulnerable at the moment, since the underlying UK economy is still weak – for example we saw negative growth in the last quarter of 2011. Exchange rates have been propped up by weakness in other economies, particularly in the Eurozone, where the single currency has been struggling as the sovereign debt crisis rolls on.
“So while the recent problems in Europe and also in the USA have given overseas property buyers better exchange rates than they might expect, many clients are now locking in their rates using forward contracts, to make sure they are not exposed to a depreciating Pound in the coming months. Currently, rates for buying Euros are nearly 8% better than in July 2011, and for US dollars, over 3% better than a month ago.
“As a note of caution, a year ago when Euro rates were up at 1.20, the Pound quickly fell back, losing over 8% by the summer and giving overseas property buyers a serious headache. Fixing exchange rates in advance is easy with a reputable currency broker, and can save a small fortune.
“We may well see more QE in the coming months if the Bank of England thinks it will help the economy, and that is not a recipe for a strong Pound as the year rolls on.”
Tags: IFA
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