Expats Lose Spending Power As Pound Weakens

0
1115

Expats are bearing the brunt of the Bank of England’s plans to punt interest rate rises into touch.

Bank of England governor Mark Carney has put any thought of a rate rise out of mind for many months.

He blames low inflation and economic volatility around the world.

The news has sent the value of the pound down against the US dollar and euro – which is good news for business but bad news for expats.

While businesses in the UK can expect demand for goods and services to rise because they are cheaper to buy with a weaker pound, expats are seeing their state and private pension payments in sterling wither away.

Booking.com

Outlook is poor

The equation is simple – the weaker the pound against foreign currencies, the less spending power for expats.

After years of historically low interest rates and offshore savings offering, meagre returns, the current economic situation is hardly the icing on the cake.

And it’s likely to get worse before improving.

With inflation running at 0.2% against the Bank’s target of 2%, the latest round of oil price decreases will have to work through the system before inflation starts to climb.

The price of oil has plunged to around $30 a barrel compared to a -price of more than $100 a barrel 15 months ago.

For expats buying a property overseas, the price will go up as the exchange rate for sterling falls, but anyone selling up to come home should find they have a few extra pounds in their pocket.

Shop around for rates

If you are thinking of buying or moving abroad soon, one poser is whether to switch currencies now or hang on to see if the pound drops lower.

One solution is to check round independent money brokers, rather than banks or building societies, because they may tie in a rate or hedge against future currency fluctuations.

Currently, a pound buys $1.43 or 1.32 euros.

Although the pound is rallying a little, low inflation is not likely to go away for some time and the European Union referendum is on the horizon, injecting uncertainty into financial markets and business.

Europe is the UK’s largest trading partner and the vote will affect the value of sterling.

Leave a Reply