Brits should send money home, experts say – just not all at once

As the state of the British pound remains uncertain in the wake of the shock Brexit vote last month, it seems that the advice for expats is to keep sending the money home while the exchange rate is good – but not all at once.

It’s been widely reported that the pound is at a 31-year low, having plummeted in value against the dollar in the days that followed the referendum, which prompted a wave of remittances to UK banks.

The local UAE press reported an eightfold increase in remittances to banks in the UK in the first few days that followed the vote.

John Sfakianakis, director of economic research at the Gulf Research Center, said: “It is a far better time to remit money now back to the UK for all kinds of financing purposes, be it for home repayments or other obligations or even simply to deposit money than prior to its collapse.”

But there’s some evidence to suggest that Brits should be holding onto a chunk of their money - as the pound could still potentially fall even further, experts say, offering the chance of even more savings.

Nour al-Hammoury, chief market strategist at ADS Securities said: “The British Pound has been falling sharply since the Brexit decision. It’s already down by more than 10% and there are many factors that may push the exchange rate even further. Therefore, sending money home right now would be a good idea but waiting for more time would be even better.”

He said that in effect, British expats living in the Gulf region, where currencies are pegged to the dollar, had seen a 10% increase in the value of their salaries, thanks to the change in the exchange rate.

“It's not a physical increase by the companies of course,” he explained. “But due to the drop in the exchange rate of the pound against all of the major currencies.”

Other currencies fell

And it’s not just the pound that has suffered, UAE daily The National reported that in the days following the Brexit vote saw falls in the value of the rupee and Euro, sparking Indian and European nationals to send more money home – although the drops were significantly less with the Euro dropping just 3% in the days after the vote and rupee just 1%.

And while people in the UK could ultimately be struggling, he said that the expected easing by the Bank of England in the coming months “will push the pound another five to 10% lower over the coming months.”

He said that because of this it would be wise to send some savings to the UK now - but not the majority.

Hammoury said waiting a while longer – perhaps until the end of the year, with money saved in local currencies, would be beneficial, as by the end of the year the exchange rate might see the pound dip even further.

“I believe it's better to keep the savings in other currencies, with currencies pegged with the US dollar such as dirhams or other regional currencies where British can be sure that the value of their savings is fixed in pegged currencies but rising in value in pounds,” he added.

Forecasters are warning of a drop in house prices – bad news for those on the property ladder, but potentially good for those who manage to jump onboard once prices have dropped.

Hammoury said people should consider other assets such as gold and silver – or even the Japanese Yen.

He explained: “Those assets are rising sharply since the beginning of the year and have more potential due to the fear of the Brexit impact over the next few months.”

But he warned people to resist the urge to pay off more of their loans and mortgages in the UK, warning that with interest rates likely to fall, there was a distinct chance of savings later down the line, rather looking to pay the mortgage faster than before.

In an interview with the website Thisismoney.co.uk Darius McDermott, managing director of Chelsea Financial Services & FundCalibre said: “Markets will now look to our politicians to see how they will deal with the situation - what plans they have to make this work.”

He was speaking before the UK’s ruling Conservative Party had started its hunt for a new leader following the resignation by Prime Minister David Cameron.

Indeed on Monday when Theresa May claimed victory in the party’s leadership campaign after Andrea Leadsom stood down, the pound rose slightly in value against the dollar – albeit by less than one cent. May is set to take over from outgoing premier David Cameron on Wednesday.

Darius McDermott added that the important thing was to avoid knee-jerk reactions from the British parliament, adding: “What we actually need is for our leaders to be sensible, rational and show us some stability.”

A lot – of course – will depend on how Theresa May handles the UK’s membership of the European Union once she takes over the helm on Wednesday. So it seems likely that the UK’s economic state will remain uncertain and unstable for sometime yet.

Pound value infographic