Hidden charges

Here's the rub...........

The rate move will all depend on the US Fed Reserve rates decision, nowt else, ignore the Euro and the pound - the pound has no impact anymore on world exchange rates, we are a pimple on the elephant's arse.

The US$ has been in freefall against the Euro for one reason. The US Govt desperate to shore up its economy in time to be re-elected again (they have done the same the last 3x at elections) by reducing interest rates and pumping liquidity into the markets - this scares the currency investors as its boom and bust (post election when interest rates have to rise to control inflation and liquidity is pulled out again to control the boom) and sod all return at 2.25% !

The Yen and US$ are seen as risky currencies at the moment for investment purposes so everyone is selling US dollars but needs a home (the yen isn't the home) and the home is the Euro coz of safe returns due to the ECB listening to no-one about how the exchange rates are damaging the French, German & Spanish economies (they'd rather support the smaller economies in the Eurozone.............. one for all brothers)

So, and this is my view.

After the US elections, they will have to raise interest rates again, and reduce liquidity which in turn will bring the investors back from the Euro (which is never a long term bet coz of the ECB acting less than the Russians in the 70's) as returns improve on the dollar, this will push the Euro back towards 1:30 by the end of this year and 1:35 next year.

I have gone from buying for cash to getting a mortgage for 2 reasons, crap exchange rate (undervalued) and stock market crash, both will recover over the next 2 to 5 years

I hope i'm right

I've just reserved some euro at 1.2502 from GCEN, they reckon its going to drop back down again, this time last year I was getting 1.45!!!

Paul.

Expect a push towards 1.29 this week, might even break past it, but won't go over 1.30.

Still expected that 1.30 to 1.35 will be a longer term position, the heady heights of 1.48 are long gone

That would be interesting, because the businesses in Euro Zone are already complaining that exchange rates are hurting their exports due to the cost of them (the Germans especially), however the ECB doesn't care as its acting ''for the brothers''

At 1.2 or lower (and bear in mind the €/$ rate is doing the same) then it will begin to affect voting in elections, what's the bet some party in Germany will put in their manifesto, that pulling out of the € will help their economy, what happens if they win ?

Massive state of flux, desperate for the US elections to finish and the US to kick start their economy, and then start to push interest rates up again to get rid of the artificial current exchange rates.

Long term 1.30 to 1.35 is the appropriate rate, 1.48 never was, but did us all a favour when placing deposits with Polaris

Again, i add ''i hope i'm right''

The world economy is a mess at the moment.......... the news that our inflation rate hit 3% today means interest rates here are unlikely to fall again before the end of the year, maybe not before 2009 as the Bank of Englands sole job is to keep inflation on target (the target is 2.5%), but is predicting a further rise, interest rates currently can't control UK inflation as energy costs are spiralling (no UK control), food costs spiralling (no Uk control) so using interest rates doesn't actually have much impact, likewise the increased cost of imports due to the struggling £ increases inflation further.............. an economists nightmare basically that we in the UK are dependent on another country (the USA) sorting out for us.

I get economic updates every day, the info that feeds the updates changes the views, the info is currently coming out unexpected (our inflation rate), so making predictions more and more difficult.......... but for once interesting

We could go on here to discuss oil prices and the expection that they will reduce to below $100 a barrel, as pretty much every airline will start posting quarterly losses once their current 'oil hedges' expire and they return to market/spot prices, if oil prices stay where they are then flight costs will have to increase substantially or airlines will start going bust, our flights to live the dream may double in cost, unless we move there.

Have you followed this ?

Thanks for that Shampers, I think....  Not sure whether that was good news or not!  Anyway, thanks for taking the time to post your views, I prefer your outlook to the one given to me yesterday. 

Anita.

And some more unexpected news (bad for us).

The French and German economies (GDP) grew more than expected in the 1st quarter of 2008 which helps the ECB retain its interest rates where they are, and as a result puts more pressure on the £ against the € encouraging it to push back down towards the 1.25 rate, and maybe below ............. lets hope tomorrows unexpected news is good for us !

Shampers you are a fountain of knowledge, keep keeping us up to date.

Anita.

If you want to be really dull, as i am for a few minutes every day then go here, read the info and listen to the podcast, to me its explained simply, but then again its crucial to my job (and to my cost of living both here and in Spain !)

The German GDP growth was a real shocker tho

If you follow it constantly then the little things that change unexpectedly and their effects on the financial markets do start to make sense

http://www.rbsmarkets.com/psp/public/home.aspx

Hi Shampers

Thanks for all your info.  I am very interested to know what kind of mortgage you have gone for.  I am thinking along the lines of a Euro mortgage but will seek help in clarifying why this is better than an English mortgage.  I know obviously that initially we will take a hit because of the low rate of the Euro but will this not be the same if we are having to transfer our sterling into Euro each month or am I just being thick.  I know that the long term hope is that we will get more Euros for the £ but someone did mention to me that it looks like the Government want the £ to be equal to the Euro (i.e. one for one) and then would be no better off.

Thanks

I've gone for the builders mortgage (not yet approved i might add) with CAM Bank and have requested 5 years interest only and 30 year full term. The rate is ok, but not the best you could get, the fee is ok but again not the best you could get, but the process is much simpler re valuation and existing mortgage in place so it does reduce fees. As i've said before on here if you can find a mortge rate 0.5% cheaper then good luck, but 0.25% saving on a  £70k mortgage is £175 p/a (that's the price of 1/6th of a san miguel a day !).

I could have got a better deal with my own company, but would have been more messing about for a minor overall saving once the extra costs of a new mortgage were taken into account.

The 'costs' of completion (IVA, registration, bank fees, sols fees etc) and furnishings i'm just going to bite the bullet on and pay cash for as...................

Have taken the view i got a great deal on my 1st 2 deposits as i booked a forward contract in Nov 06 for the 2nd deposit due August 07, so fixed 40% of my purchase price at around 1.48, the fact that i made my decision when rates were orginally about 1.36 means on average its still cost the same as i expected.

If rates had stayed at 1.48 and the UK stock market hadn't crashed then i would have sold shares and paid cash for it as 1.48 was a false rate (as is 1.25 in my opinion) but both went the wrong way, so decided to match the asset to a liability in the same currency.

In theory then as the € has strengthened then as the property is € valued, then it's worth more now in £ then when i signed for it, however no-one will pay the level of Euros i signed for so its irrelavent

As for 1 to 1 exchange rate then i'll stick my neck out and say i can't see it as inflation would go through the roof in the UK due to the cost of imports, and Euroland would have a whinge that their exports would be even more unaffordable - don't forget the US punter is in a worse position than us on exchange rates.

Mortgages as with any financial product............. there is always a better deal out there (last week, today or tomorrow) that you don't know about, so don't beat yourself up if you don't find it............. i don't, life's for living

No bad news today

http://www.rbsmarkets.com/psp/public/pagebuilder.aspx?page=public_gbmpodcast

and it's staying North of 1.25 still

http://newsvote.bbc.co.uk/1/shared/fds/hi/business/market_data/currency/11/13/twelve_month.stm

but only just

Hi Shampers

Good info keep it up, had a look at the RBS site interesting stuff, get some snow we could go skiing on that graph, thinking about it that’s what I am doing now by buying in Spain skiing that is (Spending the Kids Inheritance)

Regards

Phil

Think I've already spent the kids inheritance.

Going to push my neck out here,... there is a raft of data due out this week in both the UK and Euroland.

If it comes out as expected, then expect sterling to strengthen against the Euro at the back end of the week.

Opening commercial rate today was 1.255

All it needs is one piece of data to come out unexpectedly to change that tho