Foreign currency issues

Buyers and owners of Spanish property need to consider forex issues

Who sells foreign currencies (forex)

Specialist currency dealers and high street banks are the main suppliers of foreign currencies to British buyers of Spanish property. Both dealers and banks buy their Euros from the international currency market, add on their commission, and then sell the Euros on to you.

Most people buy their foreign currency from their bank. However high street banks are likely to give you the worst exchange rates on the planet. So why do people still buy their Euros from banks? Partly out of habit - after all they have probably bought their holiday currencies from their bank in the past - but mainly due to a lack of insight into foreign currencies and who to turn to for the best rates.

Obviously any one of the big banks would fall over themselves to offer a keen exchange rate to big companies buying millions of Euros. However Mr. & Mrs Smith and their 100.000 Euro requirement don't get this royal treatment, and are likely to end up with uncompetitive rates from a high street bank. It is no secret that high street banks make large amounts of money on the back of fat profit margins and lacklustre customer service.

For Euros, British buyers of Spanish property may be better off dealing with specialist currency brokers. Because they are specialists they know a great deal more about foreign currency purchases than your average bank branch manager, and can give you more informed advice. But most importantly of all they also offer much better exchange rates than most high street banks. Specialist currency brokers deal in high volumes of currencies that enable them to get good 'bulk' rates (just like Wal-Mart or Tesco), and then work on thin profit margins that reduce the cost to you of buying Euros.

Specialist currency brokers also offer you other advantages over high street banks.

• They charge very low fixed costs for transferring the Euros you purchase from them to any account you specify.
• They can often help you avoid the outrageous Spanish banking charges (known as lifting fees) that banks charge for receiving funds.
• They are extremely easy to use.
• And most importantly of all they know all about currencies and can give you the best advice in the business on the question of how to go about buying your Euros.

HOWEVER, using a currency broker is not without risks, the most serious being the broker going bust whilst in possession of your money.

How do I avoid overpaying for foreign currency?

Most British buyers of Spanish properties overpay for Euros by purchasing them at an expensive rate from a high street bank. A good currency broker will usually offer Euros at a better price (with better service and more understanding of you needs) so buying from a bank risks paying thousands of Pounds more than you need to for your Spanish property. Banks can get you good rates, and transfer funds at no or little cost, but in many cases they don't. The trick is to shop around, and do your research.

Because exchange rates are constantly changing, and can sometimes move quite dramatically in a short period of time, we also strongly advise you to take steps to manage your exchange rate risk the moment that you take on obligation to pay Euros, for instance when you sign a private sales contract for Spanish property. The moment you take on this Euro exposure is also the moment you should be talking to a currency broker about how to minimise the risk of your Spanish property becoming much more expensive than expected due to exchange rate movements. This is just as true of people who need Euros tomorrow as those who need them in a year's time.Before you contact a broker (bank or specialist currency broker) please note the following European Payments Council Resolution:

Payments to Europe* from 1st January 2007

From the 1st of January 2007 it will become mandatory to provide a full International Bank Account Number (IBAN) and Bank Identifier Code (BIC) along with the beneficiary name for any transfers to EU member countries.

Many of you already provide the above when sending payments but we would urge everyone to check the validity of their current information through the links below as without the IBAN and BIC there is a risk that your payment could be rejected.

The British Bank Natwest provide more information on this subject. You can check that you have a valid IBAN if you click here

For further information on International Bank Account Numbers click here to visit the information page at Natwest.

To check your Bank Identifier Code (BIC) click here

* Europe means all European Union members (and associated territories) as well as Iceland, Liechtenstein, Norway, Switzerland, Bulgaria and Romania.

© Mark Stucklin (Spanish Property Insight)

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