British Overseas Property Buyers in Eurozone

In the second in our four part series on British Overseas property buyers in the eurozone we investigate how the strength of the euro against the pound has affected them in the last 12 months

Mr and Mrs Ball are in their early forties and have three young sons under 7, Mr Ball has his own successful business and Mrs Ball works part time, Mr Ball enjoys his outdoor pursuits especially golf and his eldest son is following in his footsteps on the golf course. After a particularly profitable year in 2005 the Balls decided to make some of their money work for them and property was considered the best choice either to upsize in the UK or invests in a property in Spain. They decided to purchase a 3 bed villa on a golf course for €600,000 which at the time was approximately £402,000 to which they had a £200,000 mortgage arranged by a Spanish mortgage broker. 

Purchasing the property meant that the family have a place to go for the 6 weeks annual holidays they took and if Mr Ball and his friends decided to have a weekend of Golf away as they regularly did then they had only the flights to pay. The Balls gained some supplementary revenue by letting the villa to close friends and generally a small consideration was made as the Balls did not purchase to profit from the property.

Mr Ball explains “The Villa is wonderful, I have my eldest son and some of my friends over to play golf, we not only have the course next door to us which the green fees are subsidised for but there are another 10 or more in close proximity that are all of a very good standard and you have the sun and the lifestyle, it feels like home from home”

Despite the cost in their holidays increasing because of the value of the pound the Balls seem quite relaxed, “Of course we notice the difference, it seems that if the airlines don’t charge you for extra baggage then the value of the pound will drop anyway and everything costs more, it’s the way of the world” comments Mr Ball “Fortunately we are able to ride the storm but we have tightened our belts a little, I think because of the age of the boys they don’t demand too much but if they were say 10 and older then maybe that would be a different story.”

Late last year the Balls decided to take advantage of the mortgage rates in the UK and leverage against their home in the UK which had significant value left in it, “ We managed to get one of the last tracker mortgages with C&G at a far more competitive rate than we were getting with our Spanish mortgage so we decided to pay the Spanish home mortgage off and have the lending against the home in the UK” explains Mr Ball, “What subsequently happened was that the rate of the Pound went to €1.02 to the £1 which basically meant that if I had paid the Spanish mortgage off at that rate it would have been negated what I was trying to achieve”

After consultation with their financial advisor the family were left with this huge pot of cash and a Spanish mortgage to pay as well as an increased UK mortgage but they did not want to lose the value that they had gained. Subsequently what they decide to do was to buy 1 years worth of Spanish Mortgage payments at €1.05 and put the remainder in a fixed bond “Fortunately what we earn from the bond should cover the UK mortgage payments on the additional money borrowed but the real value will come from when the pound hopefully picks up, any increase on €1.05 that I could have exchanged at is a bonus”

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Click Here to read Part 1

Click Here to read the overview of the Euro