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Mitigating the effects of a weak pound?
Mitigating the effects of a weak pound?
This idea was described in the FT this week. Have any property owners considered pursuing this idea with a Portuguese bank? If you rent to Brits in £'s but pay mortgage and running costs in €'s it might stack up. What do you think?
“A couple of recent British purchases have gone through where, instead of converting their pounds at an unfavourable rate, the buyers opened a sterling interest-bearing deposit account with a Spanish bank,” says Barbara Wood of The Property Finders in Spain. “Against this, they took out a personal loan in euros to pay the sellers. The difference between the interest earned on the sterling deposit and the interest on the loan costs them about 1 per cent. But they can wait until sterling recovers and then convert their funds and pay off the loan...”
“A couple of recent British purchases have gone through where, instead of converting their pounds at an unfavourable rate, the buyers opened a sterling interest-bearing deposit account with a Spanish bank,” says Barbara Wood of The Property Finders in Spain. “Against this, they took out a personal loan in euros to pay the sellers. The difference between the interest earned on the sterling deposit and the interest on the loan costs them about 1 per cent. But they can wait until sterling recovers and then convert their funds and pay off the loan...”
Wow Wedge - What a crazy suggestion by this woman. Basically she is just teling people to take a gamble on the exchange rate. What if the rate goes against you? Sounds like just an estate agents spiel to try to sell some property. Should not be touched with a barge pole. You might just as well take a punt on the foreign exchange market.
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shanagarry
- CVO Legend
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- Joined: Tue Jul 27, 2004 7:26 pm
- Location: Craigweil-on-Sea
Cereza - you are very, very right. The way things are at present - Sterling has a long way to go before any sensible person should take a punt on it.
The IMF announced today that the Bristish economy will shrink by at least 3% this year - the most of all developed countries. What do you think that will do to Sterling?
I spoke to the Lady who looks after the administration of our property for us and she tells me that at this time of year she would normally have July and August booked by now - instead she has 4 bookings for Easter to Dutch and German people - no Brits.
Batten down the hatches boys and girls - there's a lot worse to come before it gets better.
The IMF announced today that the Bristish economy will shrink by at least 3% this year - the most of all developed countries. What do you think that will do to Sterling?
I spoke to the Lady who looks after the administration of our property for us and she tells me that at this time of year she would normally have July and August booked by now - instead she has 4 bookings for Easter to Dutch and German people - no Brits.
Batten down the hatches boys and girls - there's a lot worse to come before it gets better.
The IFS contradicts the IMF and says that the UK will decline under 2% and face a sharp but shorter than expected recession,
George Soros ( currency Guru ) has changed from being bearish against the £ to being neutral at current levels he thinks it is oversold.
The £ rose today against both Euro and $.
As for rentals we have had 5 enquiries so far since sunday, August is booked.
What we have not seen are enquiries from Ireland where compared to last year they would be paying 20% less due to the exchange rate changes.
George Soros ( currency Guru ) has changed from being bearish against the £ to being neutral at current levels he thinks it is oversold.
The £ rose today against both Euro and $.
As for rentals we have had 5 enquiries so far since sunday, August is booked.
What we have not seen are enquiries from Ireland where compared to last year they would be paying 20% less due to the exchange rate changes.
I thought the interesting feature was the flexibility the option affords the investor. For a 1% additional interest burden you effectively choose when / if you exchange your hard earned sterling to euro's.
On a £100,000 deposit this would mean £1000 additional cost per annum! I accept the exchange rate could go either way but it's an inexpensive way of getting a position on a volatile exchange rate. Combined with a distressed property market it's a creative way of "oiling the wheels" which is what we need to get the recovery underway.
On a £100,000 deposit this would mean £1000 additional cost per annum! I accept the exchange rate could go either way but it's an inexpensive way of getting a position on a volatile exchange rate. Combined with a distressed property market it's a creative way of "oiling the wheels" which is what we need to get the recovery underway.
Shangarry _ I am not sure if the pound will go much lower than parity with the Euro - I think it depends more on how the Euro fares than Sterling. But anything is possible in this crazy world we have at the moment and to take such a huge risk on a property deal would be extremely silly. The Pound has had 3 relatively strong days but you will always get this sort of reaction and nobody really knows what the next move will be. Soros bought back his shorts at 1-40 and remains neutral but his old mate Rogers reckons that you should drop sterling like a hot potato. You pays your money and takes your chance!!
There is a lot more water to flow under the bridge yet before we get out of this mess and anything is possible so it's not a time to take such gambles unless you have hedge fund type finances and even they don't always get it right!!
It makes me laugh when you hear all these estimates from various bodies - if they are so good why didn't they see this all coming. Their estimates are nothing more than educated guesses which are jumped upon by media and brokers to generate price movements and business volume.
I must also say that I have seen a sudden surge in rental enquiries but all from the Continent. The Brits and Irish are conspicuous by their absence and I expect it to stay that way
There is a lot more water to flow under the bridge yet before we get out of this mess and anything is possible so it's not a time to take such gambles unless you have hedge fund type finances and even they don't always get it right!!
It makes me laugh when you hear all these estimates from various bodies - if they are so good why didn't they see this all coming. Their estimates are nothing more than educated guesses which are jumped upon by media and brokers to generate price movements and business volume.
I must also say that I have seen a sudden surge in rental enquiries but all from the Continent. The Brits and Irish are conspicuous by their absence and I expect it to stay that way
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Bruce Wallis
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I read something that concerned me.
Most of Europe is under pressure and wants the European central bank to float the euro down to a more sensible level for them. But the European Central Bank under pressure from mainly the French and more the German government is holding out against any such rationalisation, and may in fact look to the EU for supportive funding to prop up the Euro.
If they are successful and get this support, we the British, even though we are not part of the Euro, but members of the community, will have to make our pro-rata contribution, even though it harms our currency further.
TRUE OR FALSE?.....discuss....and enlighten please
Most of Europe is under pressure and wants the European central bank to float the euro down to a more sensible level for them. But the European Central Bank under pressure from mainly the French and more the German government is holding out against any such rationalisation, and may in fact look to the EU for supportive funding to prop up the Euro.
If they are successful and get this support, we the British, even though we are not part of the Euro, but members of the community, will have to make our pro-rata contribution, even though it harms our currency further.
TRUE OR FALSE?.....discuss....and enlighten please
From reports that I have read that is absolutely right Bruce. Blair and Brown signed up to this in about 2001 I think from memory. Even though we are not in the Euro we will have to contribute to any funding required to support countries such as Ireland now who are in trouble. Obviously with the PIGIS all looking in danger the possible bill could be in the billions of which we will have to pay our share. Whatever we do we stand to lose!
The PIGIS desperately want lower interest and exchange rates but the Germans and French won't agree. Something will eventually have to give but which way? and depending on which way the Euro exchange rate will move accordingly
The PIGIS desperately want lower interest and exchange rates but the Germans and French won't agree. Something will eventually have to give but which way? and depending on which way the Euro exchange rate will move accordingly
Its the higher inflation and less structured economies in some of the newer eurozone members that are behind the current performance of the Euro.
With convergence being the cornerstone of ECB policy these countries have to be bought into line with Germany , Holland etc.
A " low " euro would result in risng costs and inflation.
Thats the theory anyway.
With convergence being the cornerstone of ECB policy these countries have to be bought into line with Germany , Holland etc.
A " low " euro would result in risng costs and inflation.
Thats the theory anyway.
The ECB is predominantly made up of the old Bundesbank and thus tends to follow the German line. Germany has always had a dread of inflation since the hyper inflation which occurred before the rise of Hitler and thus the ECB preoccupation has always been to keep down inflation hence the relative slowness to reduce interest rates. France follows the same line.
The so called PIGIS have economies which are faring very badly and they also have to repay loans from the ECB which is why some are having to increase taxes ( Portugals petrol price is a classic example). These countries would like to have lower interest rates and a lower exchange rate to boost their economies.
This is exactly the argument put forward years ago by Eurosceptics in the UK - there is no problem in good times but when things go bad the single Euro policy does not work. How could Gordon Brown have made his stimulus plans if the Germans would not have agreed?
Some pundits have suggested that one or more of the PIGIS could withdraw from the Euro which although highly unlikely is possible but the only other option is to receive a bail out from the ECB and because of Blair and Browns agreement the UK will have to pay its share even though we are not in the Euro.
Something will have to give but in the meantime it will just cause great uncertainty in the financial markets
The so called PIGIS have economies which are faring very badly and they also have to repay loans from the ECB which is why some are having to increase taxes ( Portugals petrol price is a classic example). These countries would like to have lower interest rates and a lower exchange rate to boost their economies.
This is exactly the argument put forward years ago by Eurosceptics in the UK - there is no problem in good times but when things go bad the single Euro policy does not work. How could Gordon Brown have made his stimulus plans if the Germans would not have agreed?
Some pundits have suggested that one or more of the PIGIS could withdraw from the Euro which although highly unlikely is possible but the only other option is to receive a bail out from the ECB and because of Blair and Browns agreement the UK will have to pay its share even though we are not in the Euro.
Something will have to give but in the meantime it will just cause great uncertainty in the financial markets
You are right Bruce, saw this in the Independent.
Yet another Blair / Brown cock up !!!
Sterling's plunge close to parity with the euro has added more than £3bn to the amount the Government must pay to Brussels over the next three years. The figure has been inflated because the Government has to pay it in euros.
The increase comes on top of a trebling of the UK contribution to the EU – from £2bn this year to £6.5bn in 2010-11 – details of which were tucked away at the end of Alistair Darling's Pre-Budget Report in November.
The report revealed that Britain's net contribution to the EU will rise to £4bn next year and £6.5bn the following year. However, the Treasury has confirmed that Mr Darling's figures were calculated at a time when £1 was worth €1.4
Yet another Blair / Brown cock up !!!
Sterling's plunge close to parity with the euro has added more than £3bn to the amount the Government must pay to Brussels over the next three years. The figure has been inflated because the Government has to pay it in euros.
The increase comes on top of a trebling of the UK contribution to the EU – from £2bn this year to £6.5bn in 2010-11 – details of which were tucked away at the end of Alistair Darling's Pre-Budget Report in November.
The report revealed that Britain's net contribution to the EU will rise to £4bn next year and £6.5bn the following year. However, the Treasury has confirmed that Mr Darling's figures were calculated at a time when £1 was worth €1.4
Sentiment seems to be moving back in favour of Sterling.
Blanchflower the BOE " Hawk " has said the he beleives Sterling to be undervalued.
George Soros has gone further stating that the long term future of the Euro is in doubt unless the ECB starts to take action to reform and revitalise the EU economies.
£ reached the heady heights of E1.11 this morning.
Blanchflower the BOE " Hawk " has said the he beleives Sterling to be undervalued.
George Soros has gone further stating that the long term future of the Euro is in doubt unless the ECB starts to take action to reform and revitalise the EU economies.
£ reached the heady heights of E1.11 this morning.
EMM
Blanchflower also said that the UK is facing the worst recession and advocated further reductions in interest rates down to zero which would be bearish for Sterling. Some sceptical pundits believe his bullish add on was just to avoid his first comments knocking the pound.
The Euro is taking a beating because of the German increased unemployment figures - with this in mind the Germans will finally agree to lower interest rates quicker and Trichet hinted that there could be a quarter point cut in Feb whereas before he insisted he would wait until at least March.
The possibility of instability in Euroland has been increased by the recent credit downgrades of Spain, Greece and now Portugal and this has added to the Euros lack of support.
With the Euro in this state there is room for the sterling rate to stay above 1-10 as long as the BOE does not follow Blanchflowers call for further reductions in interest rate. The Sterling/US $ rise may have run its course as the dollar moves up again.
Blanchflower also said that the UK is facing the worst recession and advocated further reductions in interest rates down to zero which would be bearish for Sterling. Some sceptical pundits believe his bullish add on was just to avoid his first comments knocking the pound.
The Euro is taking a beating because of the German increased unemployment figures - with this in mind the Germans will finally agree to lower interest rates quicker and Trichet hinted that there could be a quarter point cut in Feb whereas before he insisted he would wait until at least March.
The possibility of instability in Euroland has been increased by the recent credit downgrades of Spain, Greece and now Portugal and this has added to the Euros lack of support.
With the Euro in this state there is room for the sterling rate to stay above 1-10 as long as the BOE does not follow Blanchflowers call for further reductions in interest rate. The Sterling/US $ rise may have run its course as the dollar moves up again.