How Britons Have Lost Their Place In The Sun

How much would you bet on a recovery in the pound?

How much would you gamble on a recovery in our sickly pound? A fiver? A pony?

I'm in to the tune of £140,000, in the shape of a mortgage I have on a property in Norway.

I'm not alone. Hundreds of thousands of Britons are gambling the mortgage repayments on a second home overseas, and in many cases their entire continental lifestyle, on the health of sterling. And right now, we're on a losing streak.

Sun, sea, sangria and sterling

The collapsing pound has cast a dark shadow over the British dream of owning a place in the sun. More than a million Britons now own a second home overseas, and millions more have dreamed of joining them. But with the euro up 30% against our flailing currency, most will have given up on their plans to buy a little hideaway in France, Spain or beyond.

The pound isn't the only problem. Homeowners no longer have the spare equity in their UK property to fund the purchase, or the misplaced confidence that came with a decade of economic growth.

Cheap as chips

Those who already own a property overseas, particularly if they were tempted by the lower interest rates available on a local-denominated mortgage, are now paying the price for living in one coin and drawing their income in another. That's what happens if you build your home on the shifting sands of currency fluctuations.

"Spain is so cheap," they used to say, but we now know it wasn't Spain that was cheap, but its currency relative to the pound. It doesn't look so cheap now (although it may be again, if Spain flies the euro nest).

Come home

It's not all bad news. Many second homeowners will see the falling pound as an opportunity. The average property in France is worth £25,500 more than just four months ago, and £30,800 more than a year ago, according to figures from Foreign Currency Direct. This has handed overseas property owners a 22% capital increase, on average.

You won't make a killing, given that house prices are also folding on the continent, but it should help offset your losses.

It could also give you the leeway to slash the price of your property to encourage a quick sale - just in case the pound throws your plans into disarray again by staging an unexpected comeback. That's exactly what many Britons are doing. Foreign Currency Direct reports a 31% year-on-year increase in the number of Britons in Spain transferring their money back into sterling, plus 16% from France and 8% from Cyprus.

Selling up isn't as easy as it was, since you won't find so many Britons willing to buy your French farmhouse or apartment on the Costas.

And if you've shelled out for an apartment on a half-built golf resort in the deserts of Almeria, Spain, you might struggle to find anyone willing to take it off your hands.

The Dunkirk spirit.

The media has run plenty of stories of Britons driven back to rainy and recession-hit Blighty by the strength of the euro. There has been a touch of schadenfreude in some of these reports.

So should we welcome the expats back home, after years of being sunny and smug on their Costas?

I say we should, just as we did last time hundreds of thousands of Britons fled the continent for these humble shores, at Dunkirk. We've all earned a few hard lessons lately.

Stick it out.

Some people are giving up, returning to Britain with cautionary tales of foreign expeditions gone wrong. But others are toughing it out, in the old Chinese proverb, sitting on the riverbank, waiting for things to change. If they stress-tested their budgets for sharp currency movements, they should be able to hang on.

I'm holding the fort in Norway, even though the mighty krone is now doing to sterling what Vikings did to Northumberland centuries ago. I'm repaying only the interest on my mortgage, and building my savings in England in the hope of clearing a chunk of my debt if the pound recovers.

It's a risky strategy, and could backfire horribly, if the pound crumbles further, which looks more than likely.

I check the exchange rate several times a day, and if the pound does stage a comeback, however brief, I will quickly fix my exchange rate for the maximum two years my currency service HIFX allows. Because in a crisis, you can't beat peace of mind.

But if the pound goes into freefall, I'm selling up just as soon as I have fixed the roof. Just don't tell my Norwegian girlfriend.

Currency crunch.

Who knows, things could look very different in six months. Look at the dollar's sudden return to favour. Or count the vultures circling the euro.

I still wouldn't like to bet my mortgage on a recovery in the pound, but unfortunately I am.