Sterling is enjoying two-year highs, central banks have started cutting rates and the UK Government is threatening taxpayers with painful hikes. Are we on the cusp of an opportune time to sell up and escape to warmer climes? Here is some food for thought…
Stronger sterling
A €400,000 house by the Med is currently around £15,000 cheaper to a UK buyer than two years ago, thanks solely to today’s more favourable exchange rate. The savings are even greater if you buy across the pond in the USA, where a $400,000 Disney home will cost you £55,000-£60,000 less. The benefits are also felt by expats receiving Sterling income, including UK-based pensions, as they get that little bit extra transferred into their euro or dollar bank account each month.
GBP/EUR: the past year
Sterling has been on an upbeat trend for most of 2024 and is predicted to end the year as one of the world’s strongest-performing major currencies. The Bank of England’s comparatively restrained approach to lowering interest rates and unexpectedly robust economic data have helped sterling gain value over the euro and dollar.
Cheaper borrowing abroad
Buying abroad with a mortgage is finally getting cheaper! In line with falls in inflation and shaky economic data, central banks in major Western economies began slashing key interest rates this summer. Europe led the way, with European Central Bank cuts in June and September. This led to a dramatic drop in the Euribor, the rate to which European banks typcally peg euro mortgages. Encouragingly, in September, the Euribor (12-month) fell to below 3% for the first time since December 2022. With inflation in the Eurozone dipping below two per cent in September, expectations are for a third ECB cut in October, with the likelihood of further falls in Euribor.
Similarly, in the USA the first of a run of anticipated cuts came in September. The Fed lowered the range of its policy rate to 4.75-5% range from a 20-year high of 5.25-5.50% which had been sustained for 14 months. As a result, the average (Freddie Mac) 30-year fixed mortgage rate fell to 6.08%from 6.09%. This half-point cut is the beginning of six to eight rounds of further rate cuts well into 2025, according to a blog by the National Association of Realtors, with the next occurring after the Presidential election. What that space!
Would you swap life in the UK for a new start on the Cote d’Azur?
Cash out in Blighty?
Own a UK home outright or brimming with equity that you plan to sell when you move abroad? You may have chosen to sit tight during the last couple of years of negative – or at best stagnant – house price growth. But as we head into autumn 2024, signs point to the dawn of a market turnaround and better selling conditions for fidgety vendors. It might be time to get your estate agent round to do a valuation…
The Bank of England’s quarter-point rate cut in August – the first in four years, has been a key catalyst. After holding in September, analysts are predicting another cut in November. The changes are filtering through. For the third consecutive month, net mortgage approvals rose in August and are not the highest level since August 2022, according to the latest Bank of England data. At the same time, UK house prices increased by 0.7% in September, after taking into account seasonal effects, according to Nationwide’s latest index. “This resulted in the annual rate of growth rising from 2.4% in August to 3.2% in September, the fastest pace since November 2022 (4.4%),” said their chief economist. “Average prices are now around two per cent below the all-time highs recorded in summer 2022.”
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Slash your outgoings and tax bill
Concerned that your current or future tax bill might rise in the coming months, following the Government’s October budget? Sick and tired of the UK’s high cost of living? If you’re sensible, moving abroad could mean you enjoy a fabulous lifestyle and have more money in your pocket at the end of each month. We already know that the UK is a more expensive place to live compared to most Mediterranean countries (See The Cost of Living Overseas Index 2024 – Property Guides).
Pick your country carefully and take specialist financial advice and you could feasibly cut your tax bill. Several countries, including Cyprus, Italy and Greece, offer schemes enabling newly resident foreigners to pay very low flat-tax rates on foreign pensions and income. Combined with the low cost of living and affordable property on offer in these countries, it’s hard not to be tempted.
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