Beating the exchange rate
The good news for buyers is that by using a locally based Portuguese mortgage you can mitigate up to 80% of that exposure.
At the time of writing this article the Sterling/Euro exchange rate is trading at 1.1225, this sterling weakness can be attributed to the lower than expected inflation figures that have just been released. The market now believes that is less likely that the Bank of England will raise interest rates at their next meeting. Generally speaking currencies appreciate if their respective base rates are increased.
This may not be good news for U.K based clients that are looking to buy a Euro denominated property with cash or had budgeted for their purchase at a higher rate (The high for 2011 is 1.2044).
Conversely this transpires to be good news for vendors who are looking to repatriate back to the UK as the exchange rate movement will allow them more scope to negotiate whilst still retaining their desired sale price.
The good news for buyers is that by using a locally based Portuguese mortgage you can mitigate up to 80% of that exposure and pay the mortgage off partially or in it’s entirety at a later date when the exchange rate has moved to a more favorable position for you thereby making a potential foreign exchange gain on your purchase!
Partial and early redemption charges are capped at 0.5% in Portugal by law so you know with certainty from the outset as to what your exit charges will be when using this strategy.
Quinta Finance, 13.04.2011