By Laura Parsons, Currency Analyst
A combination of EU referendum uncertainty, disappointing UK data and falling Bank of England (BoE) interest rate hike expectations have seen the Pound plummet in 2016, with the currency falling by as much as 10 cents against peers like the Euro.
With Sterling struggling across the board, UK expats are getting less for their overseas currency transfers then they would have this time last year.
If you’re one of expats moving money abroad from the UK and feeling the pinch in the process, here are some tips for helping you mitigate the effect of Sterling’s fall and getting a grip on your finances.
Own Overseas Property? Consider Renting
In the UK, getting on the property ladder and owning your own home has always been viewed as preferable to renting. However, property shortages and exorbitant prices in popular locations have left many would-be first-time home owners living in rented accommodation, and the introduction of government-backed schemes have so far failed to ease the situation.
The preference for property ownership vs. renting has been maintained by British expats, with the majority of those opting to move overseas purchasing real estate on foreign soil – particularly in nations where property is more affordable than in the UK.
When the global financial crash hit in 2008, property markets in popular expat locations like Spain, Portugal and Greece were plunged into turmoil. While this was bad news for many existing property owners (with the values of expat/holiday homes plummeting) a number of expats took advantage of rock bottom prices and snapped up reasonably priced real estate in prime locations.
Whether you paid over the odds for your foreign property or bagged a bargain, with the global economic climate still uncertain and Pound exchange rates proving increasingly volatile, it might be time to reconsider the benefits of owning property abroad.
In June of 2015 the GBP/EUR exchange rate stood at 1.44. Twelve months down the line, the pairing has fallen 16 cents. If you’re finding that the notable difference in the exchange rate is making your mortgage payments difficult to meet, you may want to consider selling your current property and looking into the rental market. With a bit of research you could find a comparable property for a significantly reduced monthly outlay.
Before deciding to sell your property, however, you should look into the market and see whether prices are at a peak or are likely to pick up in the future. If property prices have increased since you purchased your home and you were planning to move at some point in the future, this could be a sensible means of mitigating the impact of Sterling softness.
Stay on Top of the Latest News
The currency market never sleeps and with exchange rate fluctuations occurring on a minute-by-minute basis, picking the best time to make your international money transfer can make a significant difference to how much foreign currency you receive.
However, how do you know if it’s the right time to make a transfer? While currencies can experience dramatic and unexpected movements in response to unforeseen circumstances (like China’s stock market crash at the beginning of 2016) industry experts can use both fundamental and technical analysis to track market movements and currency trends.
This information is readily available online and you can use it to help you gauge the best time to send your money overseas. While some of the terminology can seem daunting, a number of outlets produce market updates which tone down the jargon and make the information more accessible.
If you want to stay on top of the latest news and take advantage of any positive Sterling shifts, sign up to receive currency updates from reputable international money transfer providers and follow currency news sites on social media platforms like Facebook and Twitter.
Knowledge is power, and with the right information to hand you can make your money go further.
Cut Back on the Costs of Living Abroad
There’s no getting away from the fact that life is expensive. No matter where you live in the world, you’re going to have to deal with unavoidable expenses. But if your pocket is being pinched because of the recent Sterling slump, there are ways of cutting back on the costs associated with living overseas.
One way of reducing your expenditure is to limit the travel costs attached to making trips back home. While catching up with friends and family is essential, the range of communications technologies available, like Skype, means it’s easy to stay connected without spending a penny.
You may also find it more cost-effective to make larger, less frequent currency transfers rather than numerous smaller ones. Generally speaking, when you’re moving larger sums overseas you tend to achieve a better exchange rate, meaning your money goes that bit further.
Another simple tip is to shop smarter. Many expats miss familiar foods when they move overseas and tend to splash out in the expat sections of supermarkets. As imported food is by necessity more expensive, it makes sense to find a local equivalent instead. It may take a bit of trial and error finding the right products but it could save you hundreds of pounds a year.
Alternatively, if you find there’s just no substitute for real marmite or PG Tips, ask any visiting friends or family to bring you over a supply of your must-have goods. Of course, you don’t want to drive up their baggage costs so you may want to restrict this request to smaller items!
Consider Your Currency Transfer Options
One of the easiest ways to counter the impact of Pound Sterling volatility is to look into your currency transfer options early on.
There are a number of international money transfer providers out there, but some will offer you a better deal than others.
When selecting a provider do an exchange rate comparison to see who’s offering the most competitive rates. It’s also important to find out whether they charge transfer fees. Some do and some don’t, and this can make a serious difference if you’re moving money abroad on a regular basis.
Other important considerations when choosing a provider include their level of customer service, fund security and the range of transfer options available. Some providers will offer services like forward contracts, which allow you to fix an exchange rate for up to two years in advance of a transfer. Fixing a rate can be particularly useful if you want to budget for an overseas property purchase or sale.
It can take a little time and research to find the best international currency transfer provider for your needs, but the effort can be really worthwhile long-term.
Seek the Support and Advice of Other Expats
If you’re really struggling to get a grip on your finances you may want to seek independent financial advice. However, connecting with other expats in similar situations could also prove useful.
You could uncover simple ways of cutting costs by asking expats living in the same area for their insights and advice on saving money while living abroad. You might discover, for example, that you’ve been paying over the odds for your utilities and be made aware of a cheaper, alternative provider.
Your fellow expats may also have knowledge of tax breaks you’re unaware of, know of a mortgage provider offering better rates or be able to recommend cheaper supermarkets or clothing outlets.
If you don’t live in a bustling expat community, get online and sign up for expat forums. These can be invaluable places to connect with other people in similar circumstances and most are free to join.
If the Sterling slide is giving you cause for concern, consider implementing some or all of these money-saving measures and see if you can protect yourself from further Pound losses.