Forward currency purchase

[Perik Omo]

This is one for someone more versed in these matters than I am. We have an offer on our house in France, not as much as we wanted but at current exchange rates for €/£ it wouldn't be a huge hit compared to a year ago when we put it up for sale.

I know that there are forward currency rates as I've done a bit of reading on it but it seems that it's mainly for businesses buying and selling goods in different currencies and wanting to lock-in a particular value. I just can't read what's going to happen with the euro in the next three months or so, it might get stronger (then we would lose by buying forward) or weaken if Draghi signals an easing of QE (then we would be certain of the amount we receive and not lose out). I've looked at the current forward 3 and 6 month rates and they are acceptable.

My questions are:

1) Can an individual buy forward using the bank (or other)

2) Are there any other costs involved

3) Have I got this completely wrong and just gamble that the rate won't change before the end of the year

[keith333]

Yes, most High St banks will allow you to buy & sell forward. Happens all the time for people buying/ selling holiday homes, yachts, aeroplanes, etc.

Charges are minimal, but will mostly be in the exchange rate.

Note that for UK capital gains that you have to convert the purchase price into pounds and at sale. If the pound has dropped considerably in that period, you may be surprised at your tax bill :-(

[MrHappy]

keith333 said:

Note that for UK capital gains that you have to convert the purchase price into pounds and at sale. If the pound has dropped considerably in that period, you may be surprised at your tax bill :-(

I'm fairly certain the purchase cost is determined by the exchange rate prevailing at the time of purchase. Unless my accountant has misled me.

[keith333]

Rather than do a forward trade on the whole amount you can do half. I quite often do that as you can't predict the future, but that way you win on at least half the amount.

[ellroy]

MrHappy said:

I'm fairly certain the purchase cost is determined by the exchange rate prevailing at the time of purchase. Unless my accountant has misled me.

Also, fairly sure that CGT on currency trade, in this kind of deal, was done away with some time ago?

[keith333]

MrHappy said:

keith333 said:

Note that for UK capital gains that you have to convert the purchase price into pounds and at sale. If the pound has dropped considerably in that period, you may be surprised at your tax bill :-(

I'm fairly certain the purchase cost is determined by the exchange rate prevailing at the time of purchase. Unless my accountant has misled me.

Hi, yes sorry I wasn't very clear. The purchase price has to be converted into Sterling at the prevailing exchange rate at that time, so potentially a big gain in sterling terms if you bought the place when GBP/Euro was trading at around 1.40. If you had a Euro mortgage against the property, then it is effectively ignored for capital gains.

[Perik Omo]

Thanks all for replying. The property is our main residence if that makes a difference and we have audited accounts of the money spent so on paper it's a large loss not a gain (in France that is).