Buying a property abroad is one of the largest financial decisions most people will ever make. And for UK buyers purchasing in euros, the exchange rate on the day of completion is one of the most significant variables in the entire transaction, yet it is also one of the least planned for.
Most buyers are focused, quite rightly, on finding the right property, navigating the local legal system, and managing surveyors, solicitors and mortgage arrangements. Currency tends to be left until the last minute. That is understandable, but it is expensive.
GBP/EUR has moved by more than 6% in both directions within a single calendar year in three of the last five years. On a €500,000 purchase, a fairly typical budget for a family home in southern France, coastal Spain or the Algarve, a 3% adverse move in the exchange rate costs you approximately £13,000 in additional sterling outlay. A 6% move costs around £26,000.
| Purchase price | Rate move | Extra cost in sterling |
|---|---|---|
| €300,000 | 3% adverse | ~£7,800 |
| €500,000 | 3% adverse | ~£13,000 |
| €750,000 | 3% adverse | ~£19,500 |
| €500,000 | 6% adverse | ~£26,000 |
That is before we consider the hidden cost of using your bank. High street banks typically apply a 2.5–3.5% spread over the interbank rate on international transfers. On the same €500,000 purchase, that is another £12,000–18,000 going straight to your bank in margin you would never see on a statement, but pay nonetheless.
Combined, rate movement and bank margin, the total unplanned cost on a typical overseas property purchase can easily reach £30,000–40,000. Most buyers have no idea this is happening.
A forward contract lets you fix today's exchange rate for a transfer that will happen at a future date, typically up to 12 months ahead. Once you know your completion date and the amount in euros, you lock the rate and then settle at that rate on the agreed day, regardless of where the market has moved in the meantime. It costs nothing to set up. You typically put down a small deposit, and the balance is settled on completion. For a purchase of this scale, most buyers find the certainty is worth far more than the option value.
If you have some flexibility on timing and the rate is currently below where you would ideally like to transact, a limit order lets you set a target rate and instructs us to execute automatically when the market reaches it. You do not need to watch the market constantly. We do that for you and execute the moment your rate is achieved.
Some buyers choose to hedge part of their exposure with a forward contract and leave part open, hoping to benefit from favourable movement while protecting a floor. This is a reasonable strategy when you have genuine budget flexibility and a longer timeline to completion.
One of the most common mistakes is leaving the currency conversation until after exchange of contracts, sometimes just days before completion. At that point, you have no choice but to transact at whatever the market is doing that day, through whatever institution you can reach in time.
The ideal timeline looks like this: once your offer is accepted, even before exchange, speak to your currency provider. That is the moment you have the most flexibility to put a structure in place. If exchange is months away, you might use a limit order to try to capture a better rate. Once exchange happens, many buyers lock in with a forward contract for the completion balance.
The golden rule: do not wait until completion week. By then, your options are limited and the pressure to transact at any rate is enormous.
If you are in the process of buying overseas, whether you have just started looking or you are approaching exchange, get in touch with us. There is no obligation, and the conversation will not cost you anything. We will look at your situation, the timeline you are working to, and give you an honest view on the best approach for your specific purchase.
We handle hundreds of overseas property transactions each year, across every major market in Europe, the US, Australia and beyond. We know the timelines, the solicitor workflows and the completion pressures, and we will make sure the currency side does not become a problem on what should be one of the best days of your life.
We handle hundreds of overseas property transactions each year. Get in touch and we will build a plan around your timeline and budget.