Protect yourself against fluctuating rates
Forward contracts provide stability in a fluctuating market. You can lock in an exchange rate today which is valid for up to 1 year.
Forward contracts are available for both businesses and individuals wishing to protect themselves from the risks of an ever-moving market. Once you are a registered client, talk to your dealer about booking a contract. It’s the best budgeting tool available when you’re exposed to the vagaries of the foreign exchange market
You only need a 10% deposit to hold the rate so you can benefit from the security of the rate you want, without tying up your resources.’
“One of our clients was buying an unfinished house in Provence, France for €345,000. They paid the deposit of €35,000 in June 2010 when the rate was 1.2295. They knew they would need to pay the balance in November 2010 when the property would be completed. Talking to their dealer they decided on forward contracts, specifically locking in one at the same rate of 1.2295 for the balance of €310,000. They weren’t sure what the rate might do in that time but they wanted to know exactly how much sterling they would need to pay, as they were selling some shares.
In November the rate had moved to 1.1509 but by locking in a forward they still received 1.2295 as agreed. The cost to pay the balance of the house was £252,135. If they hadn’t opted for forward contracts, it would have cost them £269,354 to buy €310,000; a saving of £17,219. While the rate could also have moved against them this client felt it was more beneficial to have peace of mind rather than speculate in an ever-changing market. "