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Historic Dollar mark breached - 17 April 2007

A combination of a stronger-than-expected UK housing market and a sharp rise in UK inflation, added to fears over the US housing market, has served to push the exchange rate between Sterling and the US Dollar above the psychologically-important $2:£1 mark during trading on Tuesday. This is the first time since 1992 that the $2 ceiling has been passed.

This news will cheer those looking to buy property in the US, as with a strong Pound you literally get more bang for your Buck, though the prospect of interest rate rises in the UK will not make happy reading for interest-linked mortgage-holders.

Although the rate fell back below the $2-mark, the impetus for the sharp rise on Tuesday morning was the announcement the UK inflation reached 3.1 per cent in March, significantly above the government target of 2 per cent. This prompted the Bank of England to write a letter to the Treasury explaining the situation. At the announcement of these inflation figures, the Dollar exchange rate climbed rapidly and broke through the $2 barrier.

Combined with figures showing that the rate of UK house price growth jumped significantly between March and April, the predicted rise in interest rates next month is now seen by many as a virtual certainty. The average house now costs £236,490, compared with £228,183 a month ago – a rise of 3.6 per cent. Property website Rightmove’s commercial director Miles Shipside said “…whilst a boost is to be expected around Easter, £8,000 in a month is the largest amount we have ever recorded.”

Of course, with a strong Pound, buying property overseas, particularly in the US, means that you can get far more property for your money. This situation will not continue forever, but there are ways to make sure you can take advantage of the current favourable exchange rate conditions into the future. Denise Blackburn, from foreign currency specialist Moneycorp says “Overseas property investors can lose thousands in foreign currency transactions with even slight fluctuations in currency exchange rates. With the Pound edging closer to the all important 2 dollar mark, this is great news for those looking to buy property in the US. However, this current high level for Sterling might not hold for long and buyers may want to consider locking into the exchange rate at current levels. A currency specialist will be able to guide you on this.”

 

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