Ask Nat | How can I ensure I’m not at the mercy of the ever changing currency market?

Q: I am South African and have lived in London for 4 years. I have recently bought a rental property in Cape Town. How can I make sure I don’t lose out to adverse currency fluctuations with my ZAR mortgage payments? 

Nat Davison, a currency specialist at Global Reach Partners, responds: This is an interesting question given recent  currency fluctuations. In the last few months we have seen the Pound make rapid gains against the Rand. At the start of  2013 the Pound was worth 13.66 Rand before appreciating to 16.12 in June. Based on a monthly mortgage payment of ZAR 15,000, the variation in rate so far this year could mean that each repayment is costing you up to £168 more.

If you look at the same scenario over the last 12 months, in which time the Rand strengthened to 12.59 against the Pound, you  could be £261 worse off. Many people would feel tempted to just enjoy this period of relative Pound prosperity; however  those in the know see this as an excellent opportunity to use tailored currency solutions to secure a good rate for the  longer term and make sure that their money is protected should the  markets change.

So how do you ensure that you are not at the mercy of the ever changing currency market? One thing is certain, until an exchange rate has been agreed you cannot budget with any certainty. A sure fire way to give you consistency is to lock in a favourable GBP/ZAR exchange rate for up to 12 months in advance by way of a forward contract. Fixing your monthly payments in this way will give you peace of mind as you will know exactly how many Rand your Pound will equate to for the year ahead. When is the right time to lock in to a rate of exchange?

We are all guilty of wanting to trade at the peak of the market, however, in reality; we only know the top when it has gone. Nat recommends that you work alongside a currency specialist to buy your currency at an achievable, yet favourable rate of exchange that fits within your costed budget. You can then draw a line in the sand against exposure to any future negativecurrency movements. You should take care when selecting a bank or specialist broker and ensure they have the right solution to suit your needs.

Currency brokers, such as Global Reach Partners have come to the fore in recent years as they are able to offer more flexible and costsaving solutions, although many people still use their banks for currency transfers. Ultimately, it is your money so you need to be comfortable with who you opt to work with. In continuing uncertain times and with so many factors in play in South Africa, it is hard to predict with any certainty the long term picture for the Rand. In the interim do all you can to mitigate risk so you don’t lose out to adverse currency swings should they happen. To speak to Nat or his team about your foreign exchange requirements call 0203 3465 8204, email personal@globalreach-partners. com or visit globalreach-partners.com/fx/rand.