Mallorca Property Market – Impact of interest & exchange rates Sept 09
The latest Interest and Exchange Rate Forecast from the RBS Bank makes mixed reading at best for those looking to invest in the Mallorca property market and that are either Sterling denominated and / or require loan finance.
Global interest rates seem set to stay at the current unprecedentedly low rates for some time so at least nominal repayments will be similarly low. In reality of course these interest rate levels simply relect the fact that the economic picture remains dire and that inflationary pressures are currently no where to be seen. With deflation a real concern in some economies, including Spain, ”real” interest rates aren’t actually that low but let’s stick to the “glass half full” view of life, at least for the moment!
On the exchange rate front, for UK buyers of Mallorca property, the heady days of the pound in your pocket being worth 1.5 euros seem a distant memory. Again, looking at things positively, at least parity between the two currencies seems to be in the past and the trend, all be it very slow, is of a gradual increase in the value of Sterling against the Single Currency. The RBS maintain , all be it caveated with a good dose of ”but we can’t be certain”, that we should see Sterling back up to a rate of 1.3 by the end of next year.
Of course that still leaves the question of what buyers should do now, wait, use euro mortgages or plain “get out of the market”!? Regarding the latter and how we view the market we will be preparing a report later this month. Regarding “managing” the exchange rate situation the solutions really remain the same – use euro mortgage finance to buy the property (ensuring there is flexibility to repay in the future when the exchange rate improves) and ensuring that the balance, probably 40%, is transfered to Mallorca via a professional Foregn Exchange Broker offering the best rates and “no commission” transfers
Resources:
Chartered Surveyors in Mallorca
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Mallorca Property Market – Impact of interest & exchange rates Sept 09
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