Owners of overseas holiday homes are taking out mortgages on their properties abroad to buy bargains in Britain, amid signs that the euro’s strength against sterling could be about to reverse.

Brokers who deal in overseas mortgages are reporting a flurry of activity in the overseas mortgage market where approvals are up 75% since the start of the year.

Fiona Watts of the broker International Private Finance (IPF) said: “Over the past 10 years most people have raised money against their UK property to purchase a property abroad. We are now seeing a reversal of the trend. Borrowers are also benefiting from the exchange rate with the euro high against sterling.”

The euro has gained 25% against sterling since the middle of 2007. Earlier this month, sterling fell to its lowest level since the start of 2009 to $1.38 and €1.09 after the Bank of England agreed to a sixth consecutive cut in interest rates. Sterling closed at €1.08 last week.

However, the opportunity to cash in on the euro’s strength could be short-lived — spread-betting companies have reported a surge in the number of American traders betting that the euro will fall.

The European Central Bank cut interest rates to a record low of 1.5% this month and further cuts are widely expected. The Bank of England, by comparison, is thought unlikely to cut rates further and has embarked on other measures to boost the economy, such as its £75 billion “quantitative easing” programme.

Daniel Wray of FC Exchange, a currency trader, said: “Sterling has not reacted well to quantitative easing and could fall further in the short term — perhaps even getting close to parity with the euro as it did in December — but this could well be a signal to many traders to get back in. Over the medium term, we expect the euro will be hampered by further interest-rate cuts and potentially its own programme of quantitative easing.”

John Hardy of Saxo Bank, the online investment bank that specialises in currency trading, expects sterling to be strengthening by the second half of the year. He said: “The UK could bottom out more quickly than the eurozone. As a result, the pound could outperform the euro in the next two or three quarters.”

A survey by IPF revealed that 71% of foreign lenders expect the pound to strengthen to €1.20 by the end of the year.

Watts said: “Borrowers have a narrow window to make gains on their sterling transfer. Exchanging €250,000 will generate £24,138 more now than at the end of the year if the exchange rate hits 1.20.”

Overseas mortgage rates are also as good — or better — than those on offer here.

Borrowers in France are being offered 2.4% for purchases and 3.75% for remortgages — pegged to the Euribor, the rate at which European banks lend to each other — from banks such as BNP Paribas if they have a 30% deposit. Monthly repayments on a €250,000 loan would work out at €781 or £720. In Spain, you can get 2.51% from the likes of Barclays if you have a 30% deposit. Repayments on the same euro loan work out at €523 or £482. In Britain, the best two-year tracker from First Direct is at 2.89%.