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A Currency Forward Contract is a legal contract to buy a certain amount of currency or currency pairs at an agreed rate in the future.
It allows you to take control of international payments by protecting you from losses due to currency fluctuations, which is important in times of economic uncertainty.
Here are 3 key advantages to a Forward Contract
Adopting a wait-and-see approach or exchanging when you simply need to could prove very costly. Take risk off the table with a Forward Contract.
The FX market is practically impossible to predict. A Forward Contract buys you certainty, so you know exactly what your property purchase is going to cost.
Eliminate the worry and stress of exchange rate watching with a Forward Contract and give yourself the most important commodity in life back: time.
The purpose of a Forward Contract is not to make more money, but to protect you from adverse movements in the exchange rate. If you choose to use a Forward Contract, you need to accept that the market may work in your favour during the time window. If this happens, you are still obliged to complete the Forward Contract at the lower rate, as this is what has been secured on your behalf from the live market. Similar to buying a stock or share. The tool can be likened to that of a fixed mortgage instead of a variable rate mortgage where the amount you pay each month can change.
Our highly experienced currency experts use their market knowledge and a bespoke risk management software to help you decide on the right course of action.
Use our currency risk calculator to see how you can be impacted.
Mr & Mrs Jones start the search for their dream property abroad for €350,000.
The rate is 1.1854, which makes the property cost £295,258.
After finding their perfect property, they pay a deposit of 10%.
The rate is currently 1.2163, which makes the property now cost £287,757 (-£7,500).
Time to complete the purchase of their dream home and pay the final balance of €315,000.
The rate is now 1.1567, which makes the property now cost £272,326 (+£13,343).
If Mr & Mrs Jones had used a Forward Contract when they were budgeting for their purchase, they could have saved £13,343 or €15,817.
Mr & Mrs Jones start the search for their dream property abroad for €350,000.
The rate is 1.1854, which makes the property cost £295,258.
After finding their perfect property, they pay a deposit of 10%.
The rate is currently 1.1730, which makes the property now cost £298,380 (+£3,122).
Time to complete the purchase of their dream home and pay the final balance of €315,000.
The rate is now 1.1337, which makes the property now cost £308,723 (+£13,465).
If Mr & Mrs Jones had used a Forward Contract when they were budgeting for their purchase, they could have saved £13,465 or €15,961.41.
See how much your chosen currency has changed over the last 12 months:
In the last twelve months you could have … by not using a Forward Contract.
Find out more about how locking in an exchange rate with a Forward Contract can help you avoid losing money. Complete our short form to speak to one of our currency experts, or call us on +44 (0) 1322 221 121.
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