Forward contracts: Fixing your rate in advance

Whenever you convert money from one currency to another, there’s a risk that the rates of exchange will fluctuate dramatically. Sometimes this can work in your favour. But it could also make enough of a difference to ruin your plans.

A forward contract lets you fix the exchange rates for up to two whole years in advance. You’ll know exactly how much you’ll get when you transfer your money. So budgeting is simpler, and a whole lot of stress is removed.

To enter into a forward contract, you need to pay an industry-standard deposit.

You can watch our 60 second video here to learn more about forward contracts:

How it works: 

We agree the rate at which the money will transfer in the future. We take a deposit from you, and then when the transaction happens, you pay the balance at the pre-agreed rate.

This can be ideal if you’re not going to be making payment immediately – for example, if you’ve agreed to buy a house, but the completion date is a few weeks or months away. It lets you fix the exchange rate, so you know exactly what the house will cost on the day.

Flexibility

As well as letting you fix the exchange rate, a forward contract also lets you:

Change the settlement date

You can make or receive payments early – or move the date further into the future. This can be a handy way to handle foreign exchange risk if you don’t know when exactly you’ll need to pay, but you still want to fix the rate.

Make staggered payments

A flexible forward contract allows you to fix the exchange rates on a lump sum, and then make staggered, smaller payments from it, all at the same fixed exchange rate. It’s ideal if you want to make installment payments on an overseas property, or pay for building work to an overseas home. You can do it safe in the knowledge that the final costs won’t escalate above what you’ve been quoted because of exchange rates.

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