Keith Spitalnick

Regional Manager - Spain

Currencies Direct

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By Keith Spitalnick - Sun 28th Aug 2011

 

Tumbit Approved Partner

Forward contracts for individuals protect you from fluctuations in the market because you can lock in the rate – so you know exactly what your currency is going to cost you.

For the individual especially, a forward contract means that you can lock in an exchange rate today which is valid for up to 2 years. You only need a 10% deposit to hold the rate so you can benefit from the security of the rate you want, without tying up your resources. When you’re making a large value purchase in another currency you want to know exactly what that transaction is going to cost you. A forward contract allows you to fix a rate today for a payment you are going to make in the future. It’s an ideal tool when you are making stage payments on a property or yacht or know exactly which date you will be emigrating to your new home.

Forward contracts are available for individuals who wish to protect themselves from the risks of an ever-moving market. Once you are a registered client, talk to your dealer about booking a contract. It’s the best budgeting tool available when you’re exposed to the uncertainties of the foreign exchange market.

One of our clients was buying an unfinished house in Murcia, Spain for €345,000. They paid the deposit of €35,000 in June 2010 when the rate was 1.2295. They knew they would need to pay the balance in November 2010 when the property would be completed. Talking to their dealer they decided on forward contracts, specifically locking in one at the same rate of 1.2295 for the balance of €310,000. They weren’t sure what the rate might do in that time but they wanted to know exactly how much sterling they would need to pay, as they were selling some shares.

In November the rate had moved to 1.1509 but by locking in a forward they still received 1.2295 as agreed. The cost to pay the balance of the house was £252,135. If they hadn’t opted for forward contracts, it would have cost them £269,354 to buy €310,000; a saving of £17,219. While the rate could also have moved against them this client felt it was more beneficial to have peace of mind rather than speculate in an ever-changing market.

Why not contact us today by clicking the link Here to find out how we can help you find the best possible rate for your transaction ?