Pity no-one advised them to hedge against the Euro ...
- posted
20 years ago
Pity no-one advised them to hedge against the Euro ...
Indeed ... given the sums involved, I'm sure that they could have arranged a forward deal based on the exchange rate at time of contract (for a fee, of course, but presumably a lot less than the £45K implied in the programme).
Apart from that, a good 1hr infomercial for Huf Haus! Given that there was none of the usual "... and, with only one week to go, the roofing timbers are still in Albania ..." problems that normally enliven Grand Designs, a little more background info would have been nice; for example, did they have any issues wrt to planning permission, building regs., etc. I've certainly had experience of planning officers and BCOs whose immediate response would have been "you can't build that foreign thing here".
Overall, I was seriously impressed by the results: not entirely to my personal tastes, but the result was infinitely preferable to the miles of "period style executive homes" that blight so much of the home counties. The efficiency of the build was something to behold -- will the construction industy in this country *ever* learn that this is possible, rather than the usual three blokes in a rusting transit who turn up 3 hours late (if you're lucky) and spend the next hour taking a tea break while reading the Racing Post ...?
Julian
I am sure I heard Kevin say the Euro had gone down in his intro to the subject.... or was that my imagination?
Yes, he got it wrong, and it didn't make sense.
Huge, the banks always win.
IME experience of buying currency forward it's expensive, there's a hefty premium on it, it's inflexible, and in our case ended up in us paying more in bank charges because we had an amount left over at the end of the contract so we had to make an additional payment earlier than we would have chosen to do.
DG
They have very well paid actuaries to ensure they make a profit whatever happens.
Christian.
No, it wasn't. He got it the wrong way round.
Since the programme said that the clients were funding the build from savings, they could simply have opened a euro bank account and deposited the money there ...
On second thought, all they needed to do was open a euro denominated bank account at the time of placing the order and transfer the funds into it.
Quite. Not that I mind.
Agreed, on both counts.
Not necessarily. That's why they lose money. Besides, these people could have bought a futures contract from IGIndex or Cantors.
Or even just opened a euro denominated account and done all the currency transactions at one go.
This is untrue.
Shame they had to pull their old house down. If this one only lasts 40 years too then it is costing £11K/year. Sounds a lot when you think about it...
Colin
That is exactly what I thought during the program too. Especially as the total cost of the build (in Euros) was known from the start.
-- David C
All depends which direction you bet the markets are going to move. If the euro had actually lost value, this way would have been bad news.
Chris
Why? I thought it was a fixed price contract.
It was but the price was fixed in euros so if sterling moves against the euro then the value they have to pay in sterling will change.
But if they moved the money into a Euro account at the start the value in Euros wouldn't change. So they wouldn't have been short of money when payment time came.
-- David C
But the down side of this is that they forfeit the chance of paying less.
Chris
And end up paying ten per cent more !!
Exactly. They took a gamble either deliberately or through ignorance and unfortunately they lost.
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