Britain may not be joining yet, but that doesn't mean you can't

THE MORTGAGE

Although official interest rates in Euroland are much lower than they are in Britain, that does not mean that borrowing money must be cheaper. In fact, it can cost you more to take out a mortgage in Germany or France than it does here. Nevertheless, Abbey National will be offering a euro mortgage from January - but at British interest rates.

Margaret Schwarz, Abbey's head of lending policy, explains why. "Our target market is people who are paid in euros. It will be a limited number at first. But we want to develop the capability so that we can use it if demand picks up. There is a lot of pressure from business for Britain to join the euro. I don't know of any UK companies that will pay UK staff in euros yet, but I can see advantages for companies that use euros internally for doing so." In the past, there was a fashion for mortgages taken out in Swiss francs or German marks. Many people got burned when the pound was devalued 15% in 1988. Similarly, the danger with a euro mortgage is that if the pound falls in value - as it almost certainly will as Britain moves closer to joining - then the cost of the foreign currency mortgage will grow. Alan Mudd of mortgage brokers John Charcol says the best deals are here in Britain. "If you look at a five-year fixed mortgage at 6.5%, that offers excellent value. There is no real advantage in looking to the Continent, and you still have the currency risk to consider." THE BANK ACCOUNT Several of the High Street banks - including Barclays and NatWest - have already announced that they will have euro bank accounts and euro credit cards for people who want them. Tony Willis is in charge of euro developments at NatWest. "Euro accounts will be available for customers who need them. We expect a fairly low level of demand from the personal sector while the UK is out of the euro. We already have customers with accounts denominated in the currencies of the 11 countries that are joining in January. But it is in the low thousands compared to six million sterling accounts." Amanda Iremonger, Emu programme manager at Citibank, is much more positive. "We will be offering a euro savings account to existing customers. It gives them the opportunity to hold balances in euros. We have had considerable demand from customers who travel a lot to the "in" countries or who have children being educated there or who own property there. Using our Interciti facility, customers can transfer money from a euro account here to a euro account in, say, Spain instantly and free so that they can pay local bills," she says. Many banks will be offering credit cards in euros and American Express has confirmed that it would be offering a euro Amex account to its customers from very early in 1999, but only for those who are paid in euros. THE JOB So who will be paid in euros? Certainly, some nationals of euroland who work here may well prefer to be. And so may executives of British companies who travel extensively in Europe. Several large British companies have plans to trade and deal in euros as their main currency. Rover Group is one. Now owned by BMW, the company will be using euros almost exclusively from January 1999, and will even expect its UK suppliers to invoice and accept payments in euros. Spokesman Ian Strachan says the company would make it possible to pay staff in euros if there was sufficient demand. "We will still pay staff in sterling as long as Britain is outside the euro. But if there is enough demand we would have the capability to pay in euros." THE INVESTMENT But perhaps the biggest opportunity will come from investing in the massive new euro market - the second biggest in the world. At the moment, many investors simply buy into funds that track the FT- SE 100 index of shares in the biggest 100 companies in the UK. In future, we may do better following the market in Euroland. James Bevan is the chief investment officer at Barclays Stockbrokers. He says: "It is certainly worth considering how the euro environment is unfolding. There are attractive investment opportunities due to growth and restructuring in the euro countries. You can do it through a tracker fund - there is a FT-SE index which tracks 250 companies in Euroland. You could buy into a fund with a mandate to buy European stocks. But be careful, they may be taking risks. Or you could buy direct into European shares or bonds." That of course is the riskiest option.

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