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The bank of Grandma and Grandpa - foreign currency deposits for first time buyers.


Whilst it is not necessarily a trend per se, we have noticed an increase in the flow of capital coming in to the UK from abroad for the specific purpose of familial support for property purchases.

This might be a reflection of the ability of the baby-boomer generation to borrow for longer against less main-stream assets and a willingness on the part of family members to support buyers at the bottom of the property ladder.

A recent example of the this was presented to us and, noticing that it was not the first example of such a payment, we thought it not wholly irrelevant to touch some of the issues relatives commonly face when trying to support you from abroad.

Our client are a millenial couple looking to buy a property in London.

One of their grandmother's lives in Germany and wanted to help by sending money for a deposit.

The amount offered by the grandmother was EUR 75,000.

The first question asked by our client, the recipients, was 'what does that equate to in sterling'.

Understandably the recipient wanted to know the GBP value of the euro amount because that would help them assess what money they needed to provide themselves for the purchase.

One thing to note is that, if you have not yet had an offer accepted and your relative offers a certain foreign currency amount, you won't know the exact and definite GBP equivalent until you actually lock in an exchange rate.

It might be easier for our client to work out what they can contribute in GBP and then ask their grandmother to fill in the short fall to the tune of whatever euro figure needs to be exchanged.

It is a little bit of a chicken and egg scenario we suppose.

Before being introduced to us, by an existing client, the couple were simply going to provide their GBP bank account details to the aforementioned grandmother.

The euro amount sent would then equate to whatever sum their bank chose to credit.

Their bank, Santander, is notoriously uncompetitive on rates of exchange for personal customers. We surmised that, worst case scenario, the couple might receive up to 5% fewer pounds than the current commercial rate, our rate, would have given them.

Simply by asking their grandmother to send her euros to our euro segregated account the couple could increase their buying power by that margin, or 5%, at best.

When we are trying to give comparisons and illustrations as to how much more competitive we are than a high street bank we aren't simply licking our finger, sticking in the air and guessing as to what their margin might be.

Our staff are in fact customers of a range of high street banking institutions. On any given day we call any of the big banks and ask them directly what rate of exchange we could expect as one of their customers, which we are.

These are the rates and figures we use for our illustrations.

It is totally fair to say that certain banks are more competitive than others, however, none are equipped to advise on the best contract or the terms of certain contracts and it is always the case that we can shave valuable percentage points off the rate to provide better value for our customers.

It just so happens that, in this example, this couple use one of the least competitive high street institutions - for personal currency exchange - for their day to day banking.

We provided the couple with our EUR client account details and asked them to provide these to the aforementioned grandmother.

All granny has to do is visit her bank, as she would were we not involved, and ask them to electronically send the euros to the account provided.

Granny needed to remember to tell her bank that she did not want the euro amount to arrive as sterling. She was simply sending euros as euros.

In this example our client is the couple receiving the funds from their grandmother.

The eagle eyed among you will recognise the fact that this actually means we've not necessarily done any checks or 'due diligence' on the grandmother sending funds to us.

This is true, she is not our registered client and she has not gone through our on-boarding registration process.

However, this does not matter in this instance because we are in a position to receive money in from 'third parties' when the transaction is for things like the purpose of this transaction.

We might ask the couple to provide us with one or two details for their grandmother, for instance details of her address, copy of and ID and paperwork associated with this type of loan; but this is all done well in advance.

If the person sending money to us is in fact going to do more than one payment to/through us we will invite them to register as a customer in their own right.

At the end of the day, provided we can gather sufficient information to satisfy our 'know your client' policies, we are very open and willing to engage with anyone who might benefit from what we do.

If our clients want us to we can credit the agreed sterling amount, once we have locked in a rate, to their solicitor.

Whilst it does not matter much to us who you would like your funds sent to, when time is of the essence, it can be a very useful feature to send money directly to an institution or stakeholder.

We will always tell you what information we require when sending money onwards for you.

We will also check and verify that the information you have provided is correct and we can include a custom reference for you so that the recipient can identify your money when it arrives with them.

Once the euro figure arrives in our EUR client account (which is actually very similar in use to the accounts that a solicitor might hold) we immediately notify our client.

To identify the money as being for that client, given that the source is not registered with us, we will have already confirmed who is sending money to us and from which institution we should expect funds.

An automatic email goes to our client telling them that we have taken receive of 'x' amount of funds.

This amount is then immediately visible on our client's online system with us.

It sits neatly in the EUR balance box because, at this stage, we have not exchanged the money in to sterling.

In some cases we do actually lock in the exchange and the exchange rate before the euros have arrived with us.

We tend to do this in instances where the recipient (our client in this case) wants to realise a specific sterling amount. As mentioned earlier, only by locking in the rate of exchange can we then determine the euro amount that needs to be sent to us.

Prior to the euros arriving with us the 'balance' page of our online platform shows a negative foreign currency value. This becomes a positive value the moment we identify the euros, and the sterling equivalent is then visible in the GBP balance box and it is ready for release.

Our client can either login in themselves and input the details of who they want to pay, or, they can ask one of our team to do it. Service Wrappers like our 'Fully Managed', if selected, will tell us that the client wants us to input the information and release the funds; hence, you can leave any and all particular instructions with your broker if you wish.

The main point of this post is to reference the increase in 'third party' funds we see coming in to the UK for things like property purchases and to convey the ease and efficiency with which we can aid these types of clients.

All too often a client won't think to suggest us to their relative of family member and money literally gets left on the table because of the poor rates the arbitrarily selected bank applies.

This needn't be the case and we are always happy to discuss options with customers - preferably well before any deadline, please.

#deposit #firsttimebuyer #germany #euros #solcitor #completion #santander #highstreetbank

Prime Cap Payments Limited (T/A Prime Cap | Prime Cap Payments | Prime Cap Global Payments) is registered in England and Wales No: 10755730. Registered address: 27 Old Gloucester Street, London, WC1N 3AXPrime Cap is partnered with, and a programme manager of, Ebury Partners UK Limited who provide Prime Cap's FX and payment services.  Ebury Partners UK Limited is authorised and regulated by the Financial Conduct Authority as an Electronic Money Institution (Financial Services Register No. 900797) and is registered in England and Wales (registered no. 7088713). Registered office: 3rd floor, 100 Victoria Street, Cardinal Place, London, SW1E 5JL.  Ebury Partners UK Ltd is registered with the ICO with registration numnber ZA345828.