Sterling has strengthened compared to this time last year, when Theresa May was still prime minister and no-one really knew what would happen with Brexit! Here’s a reminder of how the exchange rate fluctuates and how it can affect your buying power abroad

A lot has changed since February 2019, when the UK government was paralysed by in-fighting and disagreements over Brexit, and downward pressure on Sterling’s value meant it was struggling to rise above £1/€1.16. Today, we have a new prime minister leading a government with a majority and, as of 31st January, we’ve left the European Union with an agreed transition period.

One knock-on effect of the new political landscape has been an injection of confidence into the UK’s currency. Immediately following the Conservatives’ victory in the December election, Sterling enjoyed an upswing, causing the exchange rate to hit £1/€1.19. And by mid-February it had inched up further to hover around £1/€1.20, hitting a three-and-a-half year high on 13th February. This rise in value will be welcomed by British property-buyers who are on the verge of transferring money abroad – their Sterling funds are now worth more in euros, effectively making property in Europe cheaper.

Take this smart townhouse in a country club location near the village of Benahavís in Spain’s famous Costa del Sol. On the market for €499,000, its price in Sterling today would be around £15,000 less than a year ago, thanks to nothing more than exchange rate movement. The property boasts four bedrooms, a private pool and garden, and lovely sea and mountain views.

Similarly, retirees drawing a UK-based pension will welcome a rise in the euro value of their monthly income, again caused solely by the exchange rate shift.

That said, exchange rates are unpredictable. Influenced by a combination of economic indicators, political events and market sentiment, even financial analysts can only make ballpark forecasts. Which is why anyone buying property in 2020 should take measures to protect themselves from rate movement and protect their buying power abroad.

Start by registering with FCA-authorised Smart Currency Exchange, who are Rightmove Overseas’s currency specialist partner – visit the Currency Zone for more information. Once you’ve opened a no-obligation account with them, chat with your dedicated account manager about your buying timeframe and how much Sterling you have to spend. They will guide you on the different solutions for transferring money, ultimately helping you to establish what you have to spend in the local currency of your overseas home. You may also find their free guide useful.

You may decide to use a forward contract, allowing you to secure an exchange rate for the day you need to pay a deposit or complete on your purchase. Requiring a small deposit, forward contracts effectively allow you to fix the Sterling price of your foreign purchase on the day you make an offer, taking away any uncertainty about what your Sterling cost might be on completion day six weeks or two months later. Some buyers prefer to fix the exchange rate for half the value of their purchase and buy the remaining balance of currency when they complete – your currency firm will fit a solution to around your personal requirements.