Frequently asked Questions about Foreign Exchange

There are always lots of questions when you consider exchanging one currency for another – what’s best for you, how to get the best deal for your money and many more such issues. We give you the answers to the most frequently asked questions about foreign exchange.

We are having a house built in France. We need to use our savings account to pay for the stage payments due when various work has been completed. What is the best way to move the money across?

The best way to move your money across is with a foreign exchange broker, rather than a bank.

This is because a foreign exchange broker will provide you with an exchange rate up to 4.0% better than a bank, which ultimately means you’ll receive a higher euro total.

If you’re transferring a large sum, a 4.0% difference may add up to hundreds or thousands of euros more.

I receive a company pension and my state pension every month, paid into my local UK bank account. I use the money to fund my holiday home in France. With the euro rates changing all the time it’s impossible to budget. Is there a better way to do this?

To protect yourself against the volatile euro exchange rate, look at setting up a forward contract.

A forward contract lets you to fix the exchange rate at a certain time, so that even if the rate changes later, that’s the rate you get.

For instance, if the pound rises to 1.20 against the euro, and you set up a forward contract, you’ll get 1.20, even if the pound later falls to 1.19.

What are the advantages and disadvantages of using a foreign currency specialist, rather than my bank, to move money abroad?

Here are the advantages of using a foreign currency specialist over a bank:

1. You’ll get a better exchange rate. This may be up to 4.0% better, which on a large transfer adds up to hundreds or thousands of euros.

2. Transfers are often free. By comparison, a bank may charge you between £20-40.

3. You’ll receive expert service. A foreign currency specialist will tell you how the exchange rate is doing, and guide you through the transfer process. A bank may be less helpful.

The chief disadvantage of using a foreign currency specialist over a bank is that you’ll likely be using a company you’ve not heard of before.

Hence, you need to make sure your money is safe when you use a currency specialist. To do this, ask if they’re directly authorised by the Financial Services Authority. If so, you’re in safe hands.

We are looking to buy a house in France in the next few months. Although prices are not increasing, the fluctuating Euro V Sterling rate is worrying us. What is the best way to protect our money against adverse rate changes when it could be months before we need to have access to the money?

To protect yourself against the volatile euro exchange rate, look at setting up a forward contract.

A forward contract lets you to fix the exchange rate at a certain time, so that even if the rate changes later, that’s the rate you get.

So for instance, if the pound rises to 1.20 against the euro, and you set up a forward contract, you’ll get 1.20, even if the pound later falls to 1.19.