Re: Re: Re-mortgage UK property or Euros Mortgage?



I think my post above says it all really. It’s your call on what sort of risk you want to take. I posted because the idea of hedgeing against currency flucations makes no sense when buying a property that you are going to own for possibly 20 years. (Or simply even just a buying a property that has HUGE purchase costs)

You have used the term again but you aren’t doing any hedging. If you take a Euro mortgage, then your monthly payments will vary depending upon what happens in the wider global econmomy. They may go down, up or stay static. But whatever happens where is you hedge? If they increase substantially by the Pound going back to being worth 1 Euro, then techinacally you have a house in Spain that is now worth more in Sterling. But that is only at that moment in time and it’s completely an illiquid asset. You don’t want to sell it because it’s just cost you 20,000 Euros in taxes and fees, you have only had it 6 months and we are in the deepest housing crisis that Spain has seen in a generation. You get the idea. You sell 10 years later and the UK econmy is doing so well that the exchange rate is back up to 1.5 and get back less money (in sterling) than you bought it for!! ( But for 8 of those years you had a very expensive mortgage while the UK sorted out it’s economy!!)

You are not hedging anything!

You are simply trading certainty in costs over a gamble on whether your monthly costs will go down in the future.

Buying today at an exchange rate of 1.2 is really in no mans land. At 1.0 it was unlikely that sterling would weaken further, so you had a better idea of where your gamble would go.

So you can see my post is not much help! But your logic is correct.

What I will say is that I think Spanish House prices still have a lot further to fall. At least 10~15%. If I was personally looking to buy, I would wait 12-18 months.