Hidden charges

 

Hi LRJ

Please tell who is giving 1.30 I am sat in my car with the engine running, please tell and I am on my way.

Regards

Phil

And we're just behind you

 

Hi Shampers

I have to start thinking of my next stage payment what’s your view on the Euro rate for next week or two.
Nothing like being asked to put your neck on the line, and if you get it wrong the compensation I will expect is 1 pint of good northern beer (not Bods though as that’s not from the north anymore).

Regards

Phil

Shampers

While we have your attention, what also is your view for the end of the year. I'm buying on Los Naranjos but I have already paid my second payment but will need to complete around Christmas so depending on the Euro will help me plan either a Spanish mortgage or extend my English one.

Many thanks

Phil

A general overview is required

Oil hit an all time high today of $135 a barrel (it was about $70 this time last year), which will feed through to inflation everywhere via increased manufacturing & transport costs being passed onto the public. If there was ever a time to switch to a smaller, more efficient car then its now as oil prices won't stop there, they are going to keep rising, as is the petrol price at the pump due to both this and the tax inflater calculation that has been applied by the government.

How do you control inflation ? Well you keep interest rates high, but all interest rates will do at the moment is change peoples spending habits as its food, petrol and energy costs that are soaring - the necessities

If you keep interest rates high then in theory it should help the £, but the € interest rate is high as well and unfortunately as US interest rates are at 2% then investors are buying Euros which are keeping it strong - investors don't really buy the £ anymore. There is a strong correlation between the strengthening € and the US reducing interest rates. US rates have now stabilised to some degree which has the knock on effect of helping the £/€ rate to stay within 4 cents spread, 1.24 to 1.28 for the past 2 months. My view is that this will continue until after the US Elections in November 08 following which they will have to raise interest rates in the US which should see a return to 1.30 to 1.35 in the months that follow.

Despite the above the retail sales figures out today were far stronger than expected, so whilst Mr UK has less money in his pocket due to inflation and higher mortgage rates he still seems able to spend. As a result UK interest rates shouldn't now move for a few months, maybe not until late this year / early next year. the latest MPC minutes showed a vote of 8-1 to keep rates on hold and nothing in the notes to believe they plan to change their view in the short term.

Forward rates are merely a calculation of the current exchange rate and then adding a discount or subtracting a premium based on the difference in the respective currencies interest rates. In other words they are pure maths and do not in anyway reflect what the market view of future rates may be - hence why you have currency speculators buying Euros and selling Dollars. They are getting a better return on their money and punting that the exchange rate will stay where it is for now, so that when US interest rates are put back up, they will then move into dollars again having had a better return on their money for a period of time and still get the same exchange rate in reverse.

With all the above going on I decided to match the currency of my asset with a loan in the same currency, that way the exchange rate of 1.25 v 1.48 only costs me an extra £60 p/m in interest cover (£350 p/m v £290 p/m). Now given i had priced the place at 1.35 anyway then the additional cost (in my opinion) is actually only £30 p/m. 

If i send £ over to complete in full then the additional cost based on €86k still to pay is £11k using 1.48 to 1.25 or £6k using 1.35 to 1.25.  It'll take 200 extra £30 payments (17 years) before i hit that £6k loss (and that loss would be crystallised in full if you do it whereas the extra £30 a month might fall as the £ strengthens again next year), so its a no-brainier to me to get a € mortgage at this time rather than increase my £ one in the UK or use my savings/shares.

That's how I've calculated it, but its my opinion, and it suits my personal circumstance, hope you can make sense of this and apply it to your own circumstances.

Dave

p.s. 1 pint compensation is assumed as economists can never win !




This message was last edited by shampers on 5/22/2008.

Thanks shampers for the information on the mortgage.  I think I understand (brain a little frazzled as I am still at work).  We will all have to buy you a drink in the Spanish sun for all your help.

An exchange rate of 1 to 1 tends to work very well in the bar i find.

Anyway a day at the Test Match at Lancs beckons for me tomorrow, so I'll be talking even more rubbish by tomorrow night, so if i post on here when i get in then you most definately won't be able to understand it................

Hi Shampers & PGM
                                        Lynn was in the shopping city (Runcorn) where she saw the advert in the window for the current rate. A work mate got  1.30  from an agent in Warrington (your home town shampers) and his wife who works for a travel agent says she predicts that it w

Hi Shampers & PGM
                                        Lynn was in the shopping city (Runcorn) where she saw the advert in the window for the current rate. A work mate got  1.30  from an agent in Warrington (your home town shampers) and his wife who works for a travel agent says she predicts that it will

Hi Shampers & PGM
                                        Lynn was in the shopping city (Runcorn) where she saw the advert in the window for the current rate. A work mate got  1.30  from an agent in Warrington (your home town shampers) and his wife who works for a travel agent says she predicts that it will hit

Part 2(cos my computer is acting like PW  (THE PR##K)
She says that by the end of the month it should hit 1.40 This is due to companies putting pressure on the government.(Its all dutch clogs to me)  Shampers   do think this is right or is it what comes out of a bulls a**e?

I will ask one of my minions to mooch around town tomorrow as I'm drinking all day at the cricket............. i wonder if there was a limit on how much you could buy or maybe they charged commission on it that artificially improved the rate ?

 

Hi All

Shampers I am so confused I assume I will see you at the Bar.

LRJ Medication and a lie down is required

Regards

Phil

The issue is this

The Europeans can whinge at their governments as much as they want, coz yes the exchange rate is hurting their exports, but they joined the Euro and gave up control of interest rates to a Central Bank who do things for the benefit of Europe.

If the ECB did drop rates then yes the Euro investors would sell and the rate would go back up, but 1.40 within a month

I will eat my hat if it does !

Dave

p.s. i won't really eat my hat, but i'll buy 2 drinks to everyones 1 if it does, as i'll have loads more money every month ....... well about £25 anyway

 

Hi Shampers

Just been reading your general overview post again this morning, all interesting stuff, its funny how it all makes sense when you read it in the daylight. And not being full of wine helps a little I suppose. Hope you had a good day at the Cricket.

Regards

Phil

A most excellent day that is just coming to an end

And as for cricket, then i'm disgusted that they came off for bad light at 3.45 when there was bugger all wrong with it - a total disgrace.................. and haven't researched anything today so hope nothing major has happend, as i would hate to have missed it zzzzzzzzzzzzzzzzzzzzzzzzzzz yawn

Next work day is Tuesday.................. 3 days of rest to follow........... yaaaayyyyyyyyy


This message was last edited by shampers on 5/25/2008.

Hi Shampers

Glad you had a good day at the cricket.  I've been reading your comments on exchange rates with interest over the last few days, and a couple of questions spring to mind.  

I have bought one of the penthouses on Los Naranjos, and it looks like I will be completing earlier than planned, not ideal with the current exchange rate, and will therefore, need to get something sorted pretty qucikly with regard to financing the final payment.

Your idea of getting a Euro mortgage seems logical to me, given the current exchange rate, but I was unsure how you had arrived at the monthly figures you mention in your e-mail i.e. £290/m v £350/m etc.  Also, if you are getting a Euro mortgage how would you be funding the monthly repayments?  Would you be renting your place out and covering the costs from rental income?  if not, then are you not going to have to forward money from the UK each month to your Spanish bank?  If so, I suppose at least doing this way means you are only converting an amount each month to cover the mortgage payments, and are not converting all of your savings to Euro's when the exchange rate is poor.

Look forward to hearing any comments you've got.

Cheers

Simon

Hi Simon,the question wasn't to me but I'm in much the same position as Shampers.
I'm going for a 60% Euro mortgage,this equates to some 380e per month.
The difference between say 1,24 to the pound and maybe 1.34 which we hope it goes to is £23  per month.

iF I was to fix in Euros now for 75,000e at 1.24 the difference would be some £4.500 against 1.34,which is a lot of £23's! 
It could of course go the other way,but to my mind it dodges a bullet for the time being anyway.
As for transferring money out there,I believe CAM do a sterling account which you can transfer money to,then they convert to Euros.However like most people I'm finding it hard to get info from them.
I'm sure Shampers can give more detail.
John

 

Hi

Just as John has stated we too are now going to get a Euro Mortgage as the exchange rate is to poor to convert the funds, in our case 90,000Euro final payment but we are going to make sure we have a Mortgage with little or no penalty for early redemption so that when the exchange rate improves we can then decide to pay it off if we choose

Regards

Phil

I'll add to the original comments, and hope i don't confuse myself: My maths teacher always did say ''show your workings''

I decided to match my asset with a loan in the same currency, that way the exchange rate of 1.25 v 1.48 only costs me an extra £60 p/m in interest cover (£350 p/m v £290 p/m). Now given i had priced the place at 1.35 anyway then the additional cost (in my opinion) is actually only £30 p/m. 

Interest cover calculation is €86k at 6% / 12 = €430

€430 / 1.25 = £344 
€430 / 1.35 = £319
€430 / 1.48 = £290 .............ok about £54 or £29 per month difference (think i must have been rounding up a bit, knew i should have written the figures down before typing away), however

If i send all my spare £'s over to complete in full with no mortgage then the additional cost based on €86k still to pay is (and i'm rounding here as well) :

€86k / 1.48 = £58k
€86k / 1.35 = £64k
€86k / 1.25 = £69k

So £11k more using 1.48 to 1.25 or £6k more using 1.35 to 1.25.  

It'll take 200 extra £30 payments (17 years) before i hit that £6k loss I've got on day 1 if i pay in full (and that loss would be crystallised in full if you do it whereas the extra £30 a month might fall as the £ strengthens again next year), so its a no-brainier to me to get a € mortgage at this time rather than increase my £ one in the UK or use my savings/shares.

Never had any intention of renting except to family and friends, I bought for myself on the basis i could afford it without having to rent, and until all the roads are finished, the new airport operational and Condado itself making progress then i don't feel there will be massive rental demand at Condado for a few years. A long term buy for me.

If someone has a degree in maths or a calulator, then feel free to check the figures and correct me.