We moved to Australia from the UK almost 3 years ago, and we were fortunate enough to bring most of our cash with us at the time, when the exchange rate was pretty decent.
Recently, the GBP/AUD has gone into free fall.
When we first came to Australia in January 2007 we were getting around 2.5 dollars to the pound. At the moment it's hovering around 1.67 to the pound, and seemingly still in decline.
We have a house in the UK still, which we rent out.
It got me thinking, is it worthwhile me sending any spare cash back to my UK account. I figure if send it back at 1.67, and over the next few years it picks back up to around 2 then that's about a 20% profit.
Alternatively, assuming that 1.67 is the new 'norm' for the foreseeable, we can leave the cash in th UK and pay down the mortgage instead. This may even be the better option, as no doubt the British interest rate will eventually start to climb again so it would be nice to have some of the mortgage gone before we start paying out stacks of interest again. Double benefit being that the money has stayed in the UK, so there is no tax to pay on foreign exchange gains as we haven't brought it back over here. The tax would be paid in the form of tax on any increased rental return that we make due to a lower borrowing cost in comparison to rent income.
Basically, because the exchange rate is so poor for GBP it means that we earn a lot more than we did a year ago when comparing salaries against he UK as a function of the exchange rate, so our Aussie dollar goes a lot further in the UK than it does keeping it here.
I would be interested to hear any thoughts and comments, as it all seems to easy at the moment. Am I missing something?
By the way, we're not talking mega bucks here. I'm thinking along the lines of 50% of our regular monthly savings, plus say a third of my overtime to send home at the end of each month. The dealer I use for our currency transfers only charges $12 per transaction of any amount, so dealing costs are not an issue either.
The only drawback I can see is that it is using up some of our savings at the end of each month, that potentially we wouldn't be able to bring back in a hurry if we needed to as the rate may fall yet further still, but as above, leaving it there may not actually be such a bad thing anyway.
Cheers.
Recently, the GBP/AUD has gone into free fall.
When we first came to Australia in January 2007 we were getting around 2.5 dollars to the pound. At the moment it's hovering around 1.67 to the pound, and seemingly still in decline.
We have a house in the UK still, which we rent out.
It got me thinking, is it worthwhile me sending any spare cash back to my UK account. I figure if send it back at 1.67, and over the next few years it picks back up to around 2 then that's about a 20% profit.
Alternatively, assuming that 1.67 is the new 'norm' for the foreseeable, we can leave the cash in th UK and pay down the mortgage instead. This may even be the better option, as no doubt the British interest rate will eventually start to climb again so it would be nice to have some of the mortgage gone before we start paying out stacks of interest again. Double benefit being that the money has stayed in the UK, so there is no tax to pay on foreign exchange gains as we haven't brought it back over here. The tax would be paid in the form of tax on any increased rental return that we make due to a lower borrowing cost in comparison to rent income.
Basically, because the exchange rate is so poor for GBP it means that we earn a lot more than we did a year ago when comparing salaries against he UK as a function of the exchange rate, so our Aussie dollar goes a lot further in the UK than it does keeping it here.
I would be interested to hear any thoughts and comments, as it all seems to easy at the moment. Am I missing something?
By the way, we're not talking mega bucks here. I'm thinking along the lines of 50% of our regular monthly savings, plus say a third of my overtime to send home at the end of each month. The dealer I use for our currency transfers only charges $12 per transaction of any amount, so dealing costs are not an issue either.
The only drawback I can see is that it is using up some of our savings at the end of each month, that potentially we wouldn't be able to bring back in a hurry if we needed to as the rate may fall yet further still, but as above, leaving it there may not actually be such a bad thing anyway.
Cheers.