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Inheritance taxes look like a tool that's underused when it comes to inflation in the housing market.
The banks are repeatedly raising rates for loans and mortgages but not doing so for savers rates.
Sure? Two emails today Chip raised to 4% and Marcus to 3.75%. My ISA are running at 3.5% with Nationwide.
Tony Effectively negative interest when inflation is running so high. Your investment buys less each year
Inheritance taxes look like a tool that’s underused when it comes to inflation in the housing market.
And CGT, I suspect that there are plenty of accidental landlords that would offload their rental properties if it wasn't for a CGT liability.
I’ve not said anything otherwise so no need to get shouty with me
I don't think he was. I don't read any malice at all in * that* reply
I wasn’t at all. Just having a bit of comradeship! Touchy as – dude.
This
Just wondered why you made the decision to rent. This is not a loaded question and please feel free not to answer!
Its interesting to me as you are clearly financially literate and (probably) have a good salary. I’ve been told all my life that buying is best but these days with end of life care basically destroying middle class savings and clearly the current soon to be a lot lot worse mortgage crisis, I’m interested in people who choose different
@winston - sometimes you don’t really have that many choices
I lost my business in the banking crisis and along with it, pretty much everything. Around the same time (and obviously not entirely unconnected) I was going through a divorce and basically just signed over anything regarding the house to my (soon to be ex) wife so her and my daughters at least had somewhere nice to live and grow up and didn’t have to worry about that
So getting back on the housing ladder after that was just a non-starter really.
I’m not moaning though. That’s life. There’s people far worse off than me.
We’ve been lucky and have rented the same (really nice) property for 12 years now. Our landlord is a lovely bloke and is happy to have someone in long-term who treat his place as if they owned it, so he’s nothing to worry about.
I think nowadays it’s swings and roundabouts. I’ll never own a property but then I didn’t have to shell out thousands when there was subsidence outside the front of the house and the supporting front walls to the garden had to be shorn up, or the boiler packs in
We’re happy enough renting, but then our landlord is an accidental landlord and a nice bloke. I’m sure many renters experience is very different.
We’ve had a rent increase with all this, but it’s manageable. I don’t envy any home owner coming to the end of a fixed term mortgage and having to deal with that at the moment. Some of the increases I’ve heard are terrifying
And as you’ve noted, things that were regarded as certainties in the past really aren’t any more, are they?
If we had better protection for renters in the uk it would make a lot of sense for many to rent. Even Scotlands better deal for renters is still rubbish compared to many european countries where many more folk are lifetime renters
Agreed.
I do wonder if some landlords will greedflate over inflation of costs - and what the costs will look like compared to buying.
My experience of living on the continent was everyone, bar the super rich, rented. If you lived in a place for 25 years you'd be paying the same rent as you agreed in 1998. You pour the excess into a pension. Plenty of properties for over 60s at reduced rent.
I think that one thing everyone can agree on, whether you’re mortgaged or you rent is that the entire housing situation in the UK is completely and utterly ****ed!
The whole ridiculous thing couldn’t possibly be more dysfunctional!
binners - no argument with that!
Latecomer to the thread, and not wishing to gloat (my household finances has been one of very few things that has gone well for me over the last few years!) but I took advantage of the cheap rates when they were still available 2yrs ago, when all the financial experts were staggered that mortgage rates were still so low and were saying they were going to go up anytime soon...
I fixed just over 2yrs ago @ 1.7% on a 75% LTV deal for 5yrs... Given that was what they were offering us, and we had been paying 4.2% previously (had been self employed previously, and 1st mortgage was at 90% LTV), I took the opportunity to bring the term down from 25yrs to 16 and still keep the monthly payment under £1k per month (easily affordable with 2 decent wages in the house), so we have been massively overpaying @ the low 1.7% interest rate too and now have more than 35% equity in the property already despite having only been there for 4 1/2yrs and only putting a 10% deposit down.
I do feel for those who for whatever reason, are suffering real financial hardship right now, just paying to keep the roof over their heads... But the signs were there... There was far too much cheap, easy low rate credit for far too long, and the tides were always going to turn. It was just a case of when and not if. My only regret might be not fixing for 10yrs rather than 5, but I suspect when remortgage time does finally come in 2026 I'll have saved enough on the 5yr deal compared to a 10 (10 was 2.2% interest, so 0.5% more) that it won't be such an issue if rates are still high in 2026, i'll just sign a 2yr deal and extend the terms to 25yrs again to keep the payments low(er) in the meantime.
The one thing I will say to those suffering right now... People will repeat all sorts of mistakes in their lifetimes, but they tend not to repeat financial ones! I've learnt some very hard financial lessons in my 20's and early 30's, it's only now that I'm in my 40's that everything is starting to pay off... Of course, my personal health has taken an uncontrollable nosedive, but that's another story!
Too true.
I got my first mortgage in tbe 80s when interest rates were high and volatile. The financial environment of the time meant that we were advised tonot just do our sums on interest rates as they were but also if they doubled.
It seems to me like that lesson has been forgotten. However we also had a lot less need to overextend given the much lower house prices then.
I feel very sorry for young folk now. No secure lets. No council houses and no affordable property to buy. It stinks to high heaven.
The housing market in the uk transfers money from poor to rich
Whats needed is a massive house price crash so folk can afford to buy and proper secure tenancies with controlled rents. Both are political suicide tho
Council house buikding would help as well
I feel very sorry for young folk now
sister in law in her early 40's never got on property ladder and has rented since. She's now bailed out of the UK due to costs and moved to Prague on a long term contract, she's a teacher.
looks like labour are suggesting allowing people to go interest only
https://www.bbc.co.uk/news/uk-politics-65973977
whilst this could help those in distress, it may result in requiring the rates to go even higher as the cost of money is having less of an impact (and thus pulling more people into distress). Its a really tricky situation, no easy answers
Dunno why everyone is having a go at rone. He’s probably the most knowledgeable and researched person here on about monetary and economic matters.
Also don’t understand anyone defending the economic orthodoxy. Ask yourselves a couple of simple questions. Are you better or worse off than you were a couple of years ago? Who is gaining (or at least not suffering) from the current situation?
Are you happy being a lot poorer in order to defend the status quo?
I know I’m not.
Dazh
You are conflating 2 things. Rones vehement adherence to a theory that is not universally accepted and the incompetence and veniality of our current government. There is a lot in between those two positions
Here's an alternative as far as mortgages and housing.
Stop people having 2nd and 3rd amd 4th houses. That would force the sale of lots of houses, reducing the PRICE - which will ease life for anyone who buys another house, or 1st time buyers. And force landlords to not be so greedy.
Part of the reason for the massively distorted unsustainable housing situation is that so many are sold to let, that the supply to people who want to buy is throttled - heating up the market.
Those forced to sell (and lets face it are wealthier than the masses and average in the population) ...just don't make as much mega profit as they would otherwise have done c/o year on year inflation-busting house price rises.
.
That would be tough on me and i would be left on benefits. Hard to argue against tho
I am an accidental landlord. I let my rental below market rent and its mortgage free less than 15years rental will payback most of what i spent to buy it. Its not right at all
I wouldn't ban private rentals which is effectivly what you would be doing. Forsome fplk its a good option
However i would regulate them tightly with secure tenancies and controlled rents. That would take some of the inflationary pressures out as buy to let would be much less profitable
Edit
Silly me . I would have the capital to spend now. So would not be on benefits. If i had never owned it would tho
Build many many more affordable houses where people work. But they won't due to the power of nimbyism.
Heard on 5live this morning that even during Macmillan's time some 300,000 a year were built.
Did anyone else get their £100 bonus from Nationwide ? It's better than nowt but hardly a compensation for mortgage increase.
More evidence that the Banks have got the cash to splash.
I'm on a tracker and will stick until February when I I think things will be very different to now. I've always been on a tracker but do have funds to pay off most of mortgage. But would rather not I prefer to spread capital over time at low rates. (Capital comes in handy for ticking my business over in tough times.)
Today's rate decision will be interesting. Just taking a guess at BoE pause given that's what the Fed did last week and sentiment is awful currently.
Tight to call this one, the pressure either way is immense. Everyone expecting a rate increase though.
We fundamentally need housing costs to come down to a sensible multiple of peoples earnings, something like 3 to 4 times, not 7 or 8 or more.
There are a number of ways it can be done but it will cause the housing market to crash and some will lose out. The unintended consequence might be a lot more private landlords again. Personally id make it a lot harder to be a deliberate landlord, if you are renting more than 1 or 2 houses you have to registered and undergo financial stres tests so you dont just mortgage your tits off and expect the tenant to pick uo the pieces.
The four key mechanisms to reduce house prices are:
1. Restrict what people can borrow to a more reasonable multiple of their provable base income.
2. 25 year max term, anything beyond that is ridiculous.
3. Build more houses.
4. Restrict planning permission, can only be applied to the person who applied for it and expiremit after a couple of years if building hasnt started. Too many people sitting on building land watching the price appreciate. The difference in land cost with and without planning consent is bonkers.
The price of a house has little to do with the real cost of building it.
Well the press certainly seem to be hyping up a rise after 'shock' inflation. and reporting hunt and rishi seem to think a recession is a good idea. and it's all the fault of naughty people getting below inflation pay rises causing it to 'stick'
that said we normally just copy the fed so I also think they will hold and raise it next month, because they have set the expectation
lots of rich people will be hedging and make money either way
split decision between 0.25 and 0.5% I think.
building materials and contractor rates have gone through the roof though. construction is not as 'cheap' as once was.
large constructor currently building the bagatelle quarter southampton has just gone bust. its claimed due to inflation making the project unviable
I do agree landlords should be taxed more and rents protected. when we sold our starter home more than half of those viewing were buy to let landlords who were offering cash for a quick buy. clearly some were reinvesting their pension lump sum. First time buyers somehow have to fight through that competition and that then pushes the whole market upwards
a housing crash is not needed and needs to be avoided. the fallout will it be equivalent of a economic war it will screw millions of families, for life. what is needed is a strategy that will reduce the gap between earnings and housing over the next decade or longer. not something politicians are really capable of it seems. or maybe that is the grand plan with inflation all along?!
that said we normally just copy the fed so I also think they will hold and raise it next month, because they have set the expectation
Yeah worth a guess on this.
Tories desperately need some good news going into Summer. You can imagine the back room conversations.
There is proper monetarist blood running through them though saying not hiking hard enough.
They only need to look at Fed data to see how interest rates are driving money into the economy.
We are obviously different and have not bounced like the US but part of inflation will be income interest.
I think it was Turkey who reversed their interest rate rises and inflation came down. They were ridiculously high though. Although I think there about to start putting them up again.
Just some collected thoughts, but it’s mostly bad news. Compared with previous inflationary periods, historical precedent suggests unless inflation falls to under 4% pretty swiftly we’re in for a long slog (a decade?) until it does. And historical precedent also points to a need to get real interest rates up to 4%, c12% on yesterdays number. Wealth created by the housing boom means jacking up interest rates may be less be less effective than previously because only c30% of households have a mortgage; rising rates will help more people than it hinders. In real terms, we’re already having a bit of a housing price crash - there’s quite a few houses at the upper end now showing reductions of c10% from the peak of last summer. Add in inflation of 10% plus and that is a 20% correction . Still a long way to go. There is a pretty well established 18 year cycle in property prices consisting of 14 years of growth and 4 years of falls. Guess what….2008-2022 was a good period…..
Is there any good news out there…? Well, employment remains high and looks set to remain so; as someone who turned 18 in 1981, tough times are one thing, tough times without a job and no prospect of one is a whole new ball game. The employment bit is actually one of the clues as to why the UK inflation remains stickier than other countries. I’m surprised it gets less airtime, but our economy has probably the highest percentage of activity of any classified as “services” - the selling of our time (often to ourselves) - rather than “industry “ - using machinery etc to leverage our time to sell to other countries, so wage growth impacts prices so much more immediately and persistently.
what is needed is a strategy that will reduce the gap between earnings and housing over the next decade or longer.
You have to look at the "total cost" of the house vs average earnings.
Back in the past you would usually have paid 100% of the value of a house in interest across the term of the mortgage, so a £100k house would have cost you £200k over the term.
With interest rate having been lower you're still paying £200k for the same house, its just the balance which has changed, say £150k for the house and £50k in interest.
Most people only look at the monthly payment and if that is affordable.
If you want to correct the multiple between house prices and earnings to only way you can do that is by "normalising" interest rates (in the 3-5% range).
I think 0.5%. I’d actually prefer that they went higher maybe 0.75-1% now and that the government would step in to force lenders to commit to offers already made. That way this might hammer inflation as we move into the slower periods for house buying in Aug-Dec and they can reduce rates in the new year ready for the next house buying peaks in jan-june. A short sharp hit which most people could temporarily cover with debt/savings/negotiation to get them through 6m of turmoil.
A short sharp hit which most people could temporarily cover with debt/savings/negotiation to get them through 6m of turmoil.
And what about people who don't fit into that "most" category? Just hope they're not evicted?
This is still the wrong tool, at the wrong time. Looking to past patterns of inflation and attempting to apply the good old hammer of interest rates to the current quite different situation will just cause more damage. It won't fix supply chains, it won't fix productivity, it won't do anything about cost driven price inflation... in fact it'll add to it as companies look to increase borrowing at a higher cost to get through this difficult period. Unless the plan is to push more companies into administration...? **** business? Again?
How would this 'mortgage help' be pushed out if it ever was, support people who have absolutely maxed out all available cheap credit to live well beyond their means, with the people who have been sensible just getting by as usual?
If you mean should any measures be targeted at the younger generation, forced to either have a huge mortgage or pay high rents... rather than the older generations with smaller or no mortgages... then yes. But what's the point... if you don't squeeze the already squeezed, how are you going to stop them having any money to spend? The whole logic of these interest rates rises is to make people poorer and spend less on other things. It's rubbish logic... but if you honestly believe that increasing the cost of living is the way to solve the cost of living crisis... then why ameliorate your plans by helping people with their mortgage or rent that you have deliberately pushed up?
I’d actually prefer that they went higher maybe 0.75-1% now and that the government would step in to force lenders to commit to offers already made.
FWIW Nationwide honoured the rate given in the original offer last year. I applied for a five year fix at 1%, but completed when the BoE rate had risen to 2.25%. I was sweating a bit as the offer approached its time limit but no issues in the end.
They also asked me to demonstrate the ability to repay at 12%, which would be an unpleasant experience. 4 years to worry about that though.
Seems to me that the biggest impact here seems to be on the buy-to-let market, and I am flabbergasted that political parties are calling for handouts for people with mortgages. They have been utterly silent for those who've seen their rents go up by 50% or more over the last few years.
There are definitely people who have chosen to 'live beyond their means' but they will be the minority of people impacted and focusing on them just smacks of envy. The vast majority of people bit by this will just be normal families that had little choice to mortgage to the hilt to buy a home or to pay the equivalent (if not more) in rent
‘live beyond their means’
Your occasional reminder that the pattern of the last 12 or so years is that it costs more to live here, and means haven't kept pace with those rising costs. Younger people are looking at hugely expensive housing, heating, food, water... all the staples of life... without corresponding increases in income. They are poorer people living in a more expensive country. The result of a series of decisions... mostly made on their behalf by older generations. The political fallout of a demographic shift. Yes, many people are living beyond their means. It isn't always their choice.
'live beyond your means' - is engineered in this system mostly I would say.
In other words encourage to suck up private debt and tolerate low wages whilst houses inflate.
The government has the power to control much of the economy - it chooses not to.
They have been utterly silent for those who’ve seen their rents go up by 50% or more over the last few years.
Us renters have long since just acknowledged that as far as the government is concerned, we simply don't exist. The financial interests of buy-to-let landlords however? Thats very, very important. There were some stats published not long back about what percentage of Tory MPs who owned a portfolio of rental property. The majority of them. Jeremy Hunt has loads of them. Didn't he buy a whole street?
So if any relief is coming (and I very much doubt it is), I think we all know where it'll be going.
People suffering from massive hikes in already enormous rents - latest stats published (before the latest rises) are that rent generally accounts for 28 - 40% of a renters income - don't figure as they're mainly young and don't vote Tory, whereas landlords are usually 60+ and do
It's more overall fairness than envy, how do you manage supporting the people who need it most, or does that also mean supporting people who have just hugely gambled a lifestyle on previous rates and come unstuck?
There seems a huge disparity between the two, Just interested in the available levers.
When mortgage companies make an offer they do so from an already identified and "costed" pool of money, so they will stand by the interest rate but also have a "use by" date. My first mortgage experience was going through the buying process with a live mortgage offer over the course of Black Wednesday - interest only endowment backed at 15% base rates - and it needed a call to the mortgage company to re-assure that their original terms still stood.
Rather than providing more help to all mortgage payers, the government should stop interest costs being tax deductible to all business borrowers.
Rather than providing more help to all mortgage payers, the government should stop interest costs being tax deductible to all business borrowers.
That's one way of killing investment in new equipment.
The government has the power to control much of the economy – it chooses not to.
That's a Straw Man argument. When every choice is significantly constrained by outside factors and ultimately results in potentially substantial negative consequences - there's not much of a choice.
It’s more overall fairness than envy, how do you manage supporting the people who need it most, or does that also mean supporting people who have just hugely gambled a lifestyle on previous rates and come unstuck?
There seems a huge disparity between the two, Just interested in the available levers.
Start with better wages to those that are working to run the country for the rest of us. Because they keep the roads going that the private sector operates on for example. You have to have your infrastructure/services tip-top and then the private sector benefits from this. That's how the money flows. State - Private.
Simply pay better wages in the state targetting those areas where you need a work force to fix things that are unequestionably broken.
That's called trickle up. Basically do it the opposite way around. This is the start of a better economy, and create jobs whilst looking at the green side of things.