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cashinmattress

British Expats Forced To Sell Up And Come Home

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British expats and those with a second home abroad are being forced to sell up and leave thanks to rising mortgage rates and slumping sterling.

More than 300,000 second-home owners with euro-denominated mortgages are suffering from the first European interest rate rise since July 2008, which has caused rising mortgage rates and a further fall in the value of sterling against the euro.

The euro has strengthened since the rate hike was announced, while this week's weaker-than-expected inflation figures in the UK have made a rate hike here seem more unlikely, depressing sterling. If you changed £100 this week you would receive just €112 before the rates applied by brokers, compared with €115 last month or €119 in January.

The weakening pound has proved too much for many expats. Adam Jordan, senior currency expert at money transfer specialists Moneycorp, said that the company had seen a 40pc rise in the number of people repatriating large sums of money to the UK during the first quarter of 2011 compared with the last quarter of 2010.

He said that these people were selling properties and coming home, and that their problem was likely to get worse, with the European Central Bank (ECB) expected to increase interest rates again in September of this year. "The markets are expecting a rate increase in the UK in October, but this is more uncertain because we haven't seen the Bank of England response to this week's inflation figures," Mr Jordan said. "It's possible that the gap between interest rates in the UK and abroad could widen further."

He said that many of those repatriating their money had only recently managed to sell their homes after the property crash in Spain.

Those with second homes abroad and pensioners living abroad but surviving on savings income and a sterling-denominated pension will be the hardest hit by these rate changes. For them, this is a double whammy because the rises tend to strengthen the euro against the pound and they will also be paying higher mortgage costs.

Figures from Smart Currency Exchange show that the average increase in mortgage repayments after the ECB rate rise will be £1,750 a year. Rates are expected to increase further to a possible 1.75pc.

Mr Jordan said he has seen an increased number of clients choosing to remortgage their main home in the UK in order to pay off the mortgage on their second home, and thus avoid making regular payments in euros.

Charles Purdy, director of Smart Currency Exchange, said that he was advising customers to be "very realistic" about the rates they will get on sterling. "If they have a large mortgage, the liability will have gone up in sterling terms," he said. "They need to realise that the size of their mortgage has effectively increased, and there is inflation in Europe, too, so that makes it even worse. People who are buying abroad now are more worldly wise than they were a few years ago, but I am telling them that they need to budget for €1.10 to the pound rather than €1.20 or €1.30."

For many, the rise in rates combined with slumping sterling has put paid to dreams of living in France or Spain. A survey from website www.primelocation.com showed that interest in acquiring a French property was slumping due to an increase in living costs and weaker sterling.

David Vindel, a senior public relations consultant from London, is one of those who has been hit by the changes in sterling. He has bought two properties in Spain to rent out during the past five years. "They were meant to be good investments, but things have turned out rather differently than I expected," he said.

He chose the two properties, one in Valencia and one near Madrid, as infrastructure changes made these areas seem good places to be. However, his mortgage costs have increased by £150 a month per property since he bought them, and because of slumping property prices in Spain he can't sell them either.

"I've had to dip into savings in order to transfer more money to pay for my mortgages," he said.

Like many others in the same position, Mr Vindel has considered buying fixed-rate currency, instead of relying on the vagaries of the market by taking the rate that is available to him on the day when he is sending his money.

A money broker will allow you to fix your exchange rate for up to two years, giving you greater certainty about the cost of the transactions you make. If the exchange rates move in your favour during the time of the fixed rate, you won't be able to take advantage of this, but obviously if they move adversely, you won't suffer.

The difficulty is that you may get a shock after two years when you come to get another currency deal, but at least you have had certainty for a period. These fixed rates are called forward contracts.

It is also possible to use more complex foreign exchange tools to give you the option (but not the obligation) to buy when a currency reaches a certain level.

Krusy and Fill, and their ilk, have to carry a lot of the blame, and so do the networks and experts that pimp this property pish.

I feel sorry for no-one in this manner. These punters didn't do their homework, and their ignorance come naivety sees them 'forced' from a foreign country and back to Blighty, with a lot of them hat in hand.

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Then on the other hand ....

If a property had been purchased in France, say in 2000, the exchange rate then was around €1.50 to the pound. So a 250,000 euro property would have cost a UK purchaser about £167,000.

Ignoring any increase in the price of the property over the ten years, with the exchange rate now being about €1.13, a UK vendor would now receive some £221,000 when converting back to sterling. Add on the price increase over that time, that vendor will have done very nicely.... or am I missing something?

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If they do come back, it only creates more upwards pressure in house prices.

I'd like to see how that will be the case, considering that a large percentage of these folks will likely have seen their initial deposit wiped out. Or, you are taking the p1ss.

EDIT: Folk I know who bought abroad got their deposit by MEW'ing. I'm sure there are plenty of others.

Edited by cashinmattress

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pensioners living abroad but surviving on savings income and a sterling-denominated pension will be the hardest hit by these rate changes. For them, this is a double whammy because the rises tend to strengthen the euro against the pound and they will also be paying higher mortgage costs.

i suppose you know like having at least some of the savings in the currency of the country you happen to choose to live in is too much like financial wizadry and rocket science to consider

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I'd like to see how that will be the case, considering that a large percentage of these folks will likely have seen their initial deposit wiped out. Or, you are taking the p1ss.

Depends where they bought - if it's Spain or Greece then yes their equity would have been decimated. However French property has held up better and YDBC's point maybe valid - the shift in exchange rates means the returning expat has a nice chunk of equity.

Probably balance out overall.

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Then on the other hand ....

If a property had been purchased in France, say in 2000, the exchange rate then was around €1.50 to the pound. So a 250,000 euro property would have cost a UK purchaser about £167,000.

Ignoring any increase in the price of the property over the ten years, with the exchange rate now being about €1.13, a UK vendor would now receive some £221,000 when converting back to sterling. Add on the price increase over that time, that vendor will have done very nicely.... or am I missing something?

You are right, someone who bought outright at the right time, the right place, right property, at the right price at the right exchange rate.....not so good for those with an income in pounds and a large euro loan. :o

Edited by winkie

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Then on the other hand ....

If a property had been purchased in France, say in 2000, the exchange rate then was around €1.50 to the pound. So a 250,000 euro property would have cost a UK purchaser about £167,000.

Ignoring any increase in the price of the property over the ten years, with the exchange rate now being about €1.13, a UK vendor would now receive some £221,000 when converting back to sterling. Add on the price increase over that time, that vendor will have done very nicely.... or am I missing something?

It was 1.50 in 2007

One thing that might catch some people out, is if it wasn't your permanent residence, you pay CGT on the difference in sterling even though the house price is the same.

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I'd like to see how that will be the case, considering that a large percentage of these folks will likely have seen their initial deposit wiped out. Or, you are taking the p1ss.

There will be those with enough money or resources to buy on their own.

And those who can't will get their entitlement from the state.

How could this not increase UK housing demand?

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No doubt they were busy bragging to their friends of how cr*p the UK is and how their new home is fantastic.

And they always come crawling back.

i doubt thats the case, The brits i know hardly ever highlight how crap the uk is to Johnny Foreigner pals, stiff upper lip and all that, i only really highlight it on here as youd stick out like a sore thumb being positive about the place on this site

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i doubt thats the case, The brits i know hardly ever highlight how crap the uk is to Johnny Foreigner pals, stiff upper lip and all that, i only really highlight it on here as youd stick out like a sore thumb being positive about the place on this site

Lol, I know. I appreciate the shortcomings of the UK, but it is no worse than Spain/Portugal/Greece/USA.

What I meant was that they tell all their friends in the UK about it prior to leaving. Where it's all they go on about (i've experienced this twice, both moving to Spain) - The weathers better, the people are friendlier, the beer is cheaper, they sleep in the afternoon.

Then, mysteriously they are back. One of the people I mentioned above, regrets it big time. She missed her family, was struggling to pick up the language, and struggling to get a job and to top things off, she sold her UK house cheaply (~2005, bought in the mid 90's so there would have been equity there) to 'get away as quickly as possible'. Sold up in Spain in 2009 and can't afford to buy again over here. Mid 50's so probably never will now.

The other guy I mention above is back in the same town but I have never asked him about it. Clearly it wasn't as good as he made out it would be.

Edited by hpc-craig

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i doubt thats the case, The brits i know hardly ever highlight how crap the uk is to Johnny Foreigner pals, stiff upper lip and all that, i only really highlight it on here as youd stick out like a sore thumb being positive about the place on this site

100% agree.

Whilst its good to take the Arabs for as much as you can get you always have that plan at the end of the day that sees you back in Blighty / or one of our former colonies that isn't fooked.

Edited by Kurt Barlow

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Several that I know keep coming back to the UK to get treatment under the NHS.

When it was difficult to move quickly and cheaply between nations, there was no need for the NHS people to check on people's entitlement to care.

That clearly has changed, and it would save billions if the NHS could vet people before they obtain NHS care at our expense. Instead the costs goes on to the backs of the hardworking taxpayer, for the time being at least.

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Then on the other hand ....

If a property had been purchased in France, say in 2000, the exchange rate then was around €1.50 to the pound. So a 250,000 euro property would have cost a UK purchaser about £167,000.

Ignoring any increase in the price of the property over the ten years, with the exchange rate now being about €1.13, a UK vendor would now receive some £221,000 when converting back to sterling. Add on the price increase over that time, that vendor will have done very nicely.... or am I missing something?

Yes two cases I know

1. Guy had to sell a place in Spain he bought in 2000 , he paid £50k cash and had to keep dropping the price . In the end he sold it to an Irish couple who had sold in Ireland and were not aware or interested in exchange rates as they sold and bought in euros. The guy I knew had hopped to get x amount in £ when he first put the place up for sale after dropping the price to sell he still ended up with the same amount of £ as sterling dropped along with his price.

A couple I knew a few years back bought a fu-k off place in Portugal and worked out the money they would need in £ at the start of the purchase. By the time they had to send over the money the £ had risen against the euro and they saved 10% paying £35k less than they had first allowed for. Selling up in a hurry recently they dropped the price to get rid but won again on the £ falling against the euro. None of it was planned it just worked in their favour both times.

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Then on the other hand ....

If a property had been purchased in France, say in 2000, the exchange rate then was around €1.50 to the pound. So a 250,000 euro property would have cost a UK purchaser about £167,000.

Ignoring any increase in the price of the property over the ten years, with the exchange rate now being about €1.13, a UK vendor would now receive some £221,000 when converting back to sterling. Add on the price increase over that time, that vendor will have done very nicely.... or am I missing something?

Big Euro denominated mortgage serviced in pounds would be the problem here.

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I'd like to see how that will be the case, considering that a large percentage of these folks will likely have seen their initial deposit wiped out. Or, you are taking the p1ss.

EDIT: Folk I know who bought abroad got their deposit by MEW'ing. I'm sure there are plenty of others.

Since the crisis hit the pound has devalued by about 30% against the euro. So most people who bought before the peak (i.e. most people) should now be able to knock at least 40% off their asking price and come home to blighty at no nominal loss. MEWing in pounds and converting it to euros before 2007 would have been a very good financial move (not so much using it to buy property abroad though)

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Since the crisis hit the pound has devalued by about 30% against the euro. So most people who bought before the peak (i.e. most people) should now be able to knock at least 40% off their asking price and come home to blighty at no nominal loss. MEWing in pounds and converting it to euros before 2007 would have been a very good financial move (not so much using it to buy property abroad though)

You're talking about people who may/may not have any significant amount of financial knowledge taking on a massive leveraged bet on FX movements and relative economies!!

Just because some got it right does not mean it was the correct move, and certainly should not inspire any future moves!!

Just wait, many of those who brag about their "smart financial moves", be it in HPI or FX conversion via houses, generally end up losing it all on the next big move.

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You're talking about people who may/may not have any significant amount of financial knowledge taking on a massive leveraged bet on FX movements and relative economies!!

That's what those who MEWed in pounds to buy assets in euros did. Whether they knew what they were doing or not is irrelevant. It has proved to be quite a good hedge for them: as their retirement incomes in pounds have been devalued, their assets in euros have held their value somewhat.

Just because some got it right does not mean it was the correct move, and certainly should not inspire any future moves!!

I didn't say it was the correct move, I simply said it proved to be a good move.

Just wait, many of those who brag about their "smart financial moves", be it in HPI or FX conversion via houses, generally end up losing it all on the next big move.

I wasn't bragging, just pointing out that there has been an upside for those who MEWed to buy in the eurozone. I don't think those people have made much money out of the situation, but I'm pointing out that they might not have lost as much as some people on here would wish. As you say they're probably not financial experts - they've probably got better things to do.

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I wasn't bragging, just pointing out that there has been an upside for those who MEWed to buy in the eurozone. I don't think those people have made much money out of the situation, but I'm pointing out that they might not have lost as much as some people on here would wish. As you say they're probably not financial experts - they've probably got better things to do.

Fair enough, but going back to the OP - some people will have had it good both ways, it's just a shame that most of the people I know did not buy early enough, and I'm guessing that many people did but in the bubble phase and are nursing some hefty losses.

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You're talking about people who may/may not have any significant amount of financial knowledge taking on a massive leveraged bet on FX movements and relative economies!!

Just because some got it right does not mean it was the correct move, and certainly should not inspire any future moves!!

Just wait, many of those who brag about their "smart financial moves", be it in HPI or FX conversion via houses, generally end up losing it all on the next big move.

+1

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Fair enough, but going back to the OP - some people will have had it good both ways, it's just a shame that most of the people I know did not buy early enough, and I'm guessing that many people did but in the bubble phase and are nursing some hefty losses.

I think anyone who bought between 1994 and 2000 has had it good in every possible way. I guess that happens sometimes. What concerns me more is that for the last 10 years various governments have tried everything possible to lock in those gains, at the expense of anybody now under 35. Free market my ****!

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  • 312 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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