Caroline agreed to buy a property in Florida for 730,000 dollars in September 2024, a commitment of roughly 550,000 pounds at the rate of the day, with completion four months away and a United States presidential election in between. She fixed 75% of the purchase price on a forward contract and left the remaining quarter to convert at spot nearer to closing. Sterling then fell more than 8% against the dollar before she completed. This is what the decision was worth, including the part of it that did not work. Medlock & Thames is a currency broker, so this is an account of one transaction rather than a recommendation about how anyone else should structure theirs.
What was the exposure?
The price was agreed in dollars. Caroline's money was in pounds. Nothing about the property changes when the exchange rate moves, but the amount of sterling required to buy it changes every day, and that number was not fixed until the money was converted. On a 730,000 dollar purchase, every one cent move in the pound against the dollar was worth roughly 4,100 pounds. A 5% move, well within a normal year, was worth around 27,000 pounds. That exposure existed from the moment the price was agreed rather than from the moment the money moved.
Why did the timing feel uncomfortable?
Because the calendar between agreement and completion was crowded and none of it was within her control. A United States presidential election was due on 5 November 2024. A UK Budget was set for 30 October. The Bank of England and the Federal Reserve had both begun cutting interest rates but not at the same pace, and the gap between two countries' interest rates is one of the main things that moves their exchange rate. On top of that, a property closing date can move for reasons that have nothing to do with currency, from survey findings to title work. So the amount was certain, the date was approximate, and the rate was unknowable.
What did she actually do?
She split the exposure. On 20 September 2024, with sterling trading at 1.3307 against the dollar, she fixed 547,500 dollars, three quarters of the purchase price, on a forward contract at a rate close to 1.3290, which cost about 412,000 pounds. A forward contract fixes today's rate for a payment on a future date in return for a deposit, with the balance due at maturity. The forward rate sat very close to spot here because UK and US interest rates were themselves close at the time, not because of any view on direction. The remaining 182,500 dollars was left to convert at spot nearer to closing.
What happened to sterling after that?
It fell, and not gently. The dollar rallied hard after the November election, the Bank of England cut Bank Rate to 4.75% on 7 November, and in the first two weeks of January 2025 UK government borrowing costs rose sharply and sterling was sold alongside them. Using rates derived from the reference rates published daily by the European Central Bank, the pound bought 1.3307 dollars on 20 September 2024 and 1.2117 on 13 January 2025, a fall of about 8.9% in under four months. Completion came in the middle of January 2025, with the rate at 1.2191, so the final quarter of the purchase cost about 149,700 pounds. Total sterling cost was about 561,700 pounds, a blended rate of 1.2997 across the whole purchase.
What was the hedge worth?
Converting the entire 730,000 dollars at the completion day rate of 1.2191, which is what would have happened without a forward, would have cost about 598,800 pounds. She paid about 561,700 pounds. The forward was worth roughly 37,100 pounds against doing nothing, on a purchase of about 550,000 pounds.
The honest counterpoint is the quarter she left open. Fixing the entire amount on 20 September would have cost about 549,300 pounds, roughly 12,400 pounds less than the split. So the hedge worked and the unhedged portion cost her, which is the same trade running in both directions on the same transaction. Neither figure was knowable in September. Had sterling risen instead, those two numbers would have swapped places, and this story would read as the mirror image.
Why fix 75% rather than all of it?
Fixing everything removes the risk and also removes any benefit if the market moves in your favour. Fixing nothing does the opposite. A partial hedge sits between the two and is a common structure where the completion date is not fully certain, because it also leaves flexibility: if closing had slipped, only the unhedged quarter would have needed rearranging rather than the whole purchase. How much to fix is the client's decision and depends entirely on how much uncertainty they are prepared to carry. We set out the general considerations in how a forward contract works when buying property abroad.
Would waiting have been better?
On this occasion, no, and it is worth being clear that this was not foreseeable. On 20 September 2024 sterling was close to its strongest level against the dollar in more than two years. Nothing about that guaranteed a fall, and a client who had decided to wait for a better level would have been waiting still at completion, converting the full amount roughly 8% worse. The desk did not forecast the drop and does not forecast the market. What the forward did was make the outcome irrelevant to three quarters of the purchase.
What does the client say?
I highly recommend Medlock & Thames brokerage services because they were able to wrap logic around what could be a very emotional reaction to a very large currency exchange decision. My dealer, Chris', understanding of external influences, taking time to understand my needs and ultimately their ability to formulate an FX strategy fitting to my situation demonstrates that Medlock & Thames is the best partner you could have. Caroline, private client.
Wrap logic around an emotional reaction is a fair description of what the conversation involves. A large one off conversion produces a strong urge either to act immediately or to wait for a better number, and neither instinct is based on anything. Structuring the decision in advance, deciding how much to fix and accepting what that trade means in both directions, is what stops the rate on any single morning from feeling like a verdict.
According to Medlock & Thames
In our experience the hardest part of a large personal conversion is not choosing an instrument, it is deciding in advance what success will be measured against. Clients who set that measure as the best rate available in hindsight are always disappointed, because there is always a better day somewhere in the following year. Clients who set it as a cost they can plan around are almost always satisfied, regardless of what the market does afterwards. The pattern we see most often on the desk is that the unhedged portion of a purchase is what people remember, in either direction, which is a good argument for choosing that proportion deliberately at the outset rather than by default.
Frequently asked questions
What rates are quoted in this story?
The market rates are daily reference rates, published and free to check. The forward rate is the rate agreed on the day between the client and the desk, and it differs from spot because of the interest rate gap between sterling and the dollar rather than any view on the market.
Would a different split have been better?
With hindsight, fixing more would have cost less on this transaction, and fixing less would have cost more. Had the pound risen instead, the reverse would be true. There is no split that is right in advance, which is why the desk explains the trade rather than recommending a proportion. The decision is the client's.
What happens if the property closing date moves?
Forward contracts can often be extended, or structured as a window forward that can be drawn on across a range of dates, which is why a completion date that might slip is usually set a little beyond the realistic date. Any change has a cost attached that depends on where the market is at the time.
Are there checks on a transfer this size?
Yes. The FCA authorised institution carrying out the transfer must complete anti money laundering checks, verifying identity and, on a sum of this size, asking for evidence of the source of funds. Gathering that early avoids a delay against a closing date. There are also US reporting obligations attached to owning property abroad that a client should raise with their own tax adviser, since we cannot advise on tax.
Is the money covered by the FSCS?
No. Payment services and electronic money are not covered by the Financial Services Compensation Scheme. Client money is protected by safeguarding, which requires the institution to keep customer funds separate from its own. See how we are regulated and how your money is protected.
Related articles
This story is part of our client stories series. For the corporate equivalent, read how a ski academy fixes its euro costs. For the practical detail behind this transaction see buying property abroad, how a forward contract works, what it costs to transfer money abroad to buy a property and a currency specialist compared with your bank. To speak to a dealer about a purchase of your own, see personal currency.
This case study may not be indicative of all customers. Results may vary, and customers agree to proceed at their own risk. Medlock & Thames is a currency broker and does not provide regulated financial advice. Published with the client's permission.
