How can I secure an exchange rate?
When you buy foreign currency there are two contract types - spot and forward.
A 'spot' contract enables you to buy foreign currency immediately for settlement within 2 working days. This is the simplest way to buy currency. If you need to make a fast payment, then this contract may suit you.
A 'forward' contract enables you to fix an exchange rate for settlement anything up to 2 years in the future. This fixed exchange rate enables you to calculate the sterling cost of your property and, as it does not need to be paid for until the maturity date, it enables you to budget and resolve any immediate cash-flow concerns. This is often the case if, for instance, your house sale has not completed but you want to secure an advantageous exchange rate.
As the availability of your funds, the payment plan of your new property and the best available exchange rate rarely coincide, forward contracts are a popular option. They are a cost effective and simple way of securing an exchange rate and simultaneously eliminating the risk posed by exchange rate volatility.