Interest rates

[calibeach76]

Booming house prices over your working life, job security if not a job for life, solid pensions often gold plated final salary etc etc. None of which enjoyed by my generation nor likely to be by my children's or future grandchildren's so forgive me for not shedding a tear.

 

[soulstyledevon]

I don't recall interest rates of 15% and a three day week making life easy!

1974/5 average property price sub £10k.
Yep, I’ll take that 15% interest rate

 

[Wildcamper]

1974/5 average property price sub £10k.
Yep, I’ll take that 15% interest rate

But my salary in 1974 was £1300/year!

 

[pjm-84]

You may need a bent accountant to get your money offshore and away from the sticky hands of HMRC. Or become a Tory politician where tax avoidance is de-rigueur

Lol...easy..... its called a pension

 

[Amarillo]

I don't recall interest rates of 15% and a three day week making life easy!

Oh Lordy! I recall my mortgage rate of 14.75%. I had a loan of £40,000, so paying £492 interest plus £55.40 endowment per month from a salary of £768 per month. I had to take in a lodger.

No washing machine, just traipsed down to the laundrette with a handful of 20ps every Saturday morning; pants and socks washed in the shower.

 

[Amarillo]

Booming house prices over your working life, job security if not a job for life, solid pensions often gold plated final salary etc etc. None of which enjoyed by my generation nor likely to be by my children's or future grandchildren's so forgive me for not shedding a tear.

Public sector still get final salary pensions.

 

[calibeach76]

Public sector still get final salary pensions.

I know. Disgraceful.

 

[subthree]

I know. Disgraceful.

Please find get me started on the Public sector.

 

[calibeach76]

Please find get me started on the Public sector.

Tbh I am yet to see a convincing argument for the public sector in any capacity and no I didn't clap for the NHS either...

 

[andyinluton]

If you have additional property there are still some nice little wheezes to avoid tax.

Remortgage your buy-to-let property every five years to 60% or 75% to take out 60% or 75% of the increase in value *tax free*. And as a bonus the taxman will return to you by way of a tax credit 20% of your additional mortgage interest.

E.g. £1.5m property portfolio in 2018 (£900,000 mortgage; £600,00 equity). £1.9m in 2023.

Remortgage to £1.14m taking a tax free cash bonanza of £240,000.

There will be a cost of extra interest, 4.79% is available on a five year fix interest only BTL, so £57,480 over five years but the philanthropic taxman will return £11,496 to you.

So over five years you will have netted over £194,000.

Of course this is dependent on property prices continuing to rise, in this example at ~5% per year. Property prices may well fall.

Sounds like a pack of cards teetering on the edge.
Remortgaging investment properties to that extent is getting dangerous.
Theres a couple of risky bits:

If your at 75% mortgage & there's a slight dip in the market you won't be able to get a remortgage.

Similarly getting a BTL mortgage without showing 25% more rent than mortgage is getting harder and harder, you could be effectively blocking yourself from getting a remortgage when the new one expires.

Where is the fixed rate mortgage coming from without fees? best I can find with a 5 year fix has almost £4k of fees + legals per property & as its a portfolio I'm guessing we are talking 3 or more properties.

The so called philanthropic taxman won't give you a penny, he may take less from you, but only if you've got enough rental income for it to be set against.

Capital gains tax, your increased property value is subject to capital gains on the increase - just your 2018-2023 bill is £112k, if you've owned them since say they were worth £500k you've got a capital gains bill of £392k coming if you ever sold, so your actual £1.9m property empire is worth say £1.9m less the £1.14 mortgage, less £392k tax less say £50k in estate agents / solicitors fees etc gives an actual worth of £318k. Pop your clogs & there's inheritance tax to pay so someone would be would be left with £190k.

If you've put your property empire into a trust to avoid the IHT of course you cant just take out another mortgage and walk away with the cash, its not yours - it belongs to the trust.

Similarly if you've done it as a limited company you cant get the cash out without it being taxed.

Then of course you best hope your tenants can keep up with the rent - even at 4.79% you've got a bill of £4,550 to pay every month on property that you only own a fraction of.

 

[GrumpyGranddad]

Boomers have ridden the economic system by and large to their benefit and everyone else's detriment and in many cases have pulled up the drawbridge. Boomers are my parents generation and no generation since or possibly ever again will have it so good and so easy. I can only hope that if by my retirement I am as comfortable then I will share the wealth accrued to ensure my children and grandchildren see the benefits of my wealth.

Hi @calibeach76

Just back from the pub

I was born in 1951 so I guess i’m a boomer. All I can say is that during the early years of married life and having 3 kids our mortgage payments were astronomical, we had virtually no disposable income. Then as I approached retirement age the Equitable Life fiasco, Northern Rock, the 2008 crash, artificially low interest rates (quantitive easing), etc, etc, significantly changed my retirement plans (and not in a good way).

Don’t think i’ve done anything in my life to the detriment of others and haven’t pulled up the drawbridge.

I do note that my kids (and their peers) seem to have better houses, nicer furniture, posher cars, more extravagant holidays, etc than I did at their age.

So, not sure your take on the Boomers is totally accurate?

 

[Amarillo]

Sounds like a pack of cards teetering on the edge.
Remortgaging investment properties to that extent is getting dangerous.
Theres a couple of risky bits:

If your at 75% mortgage & there's a slight dip in the market you won't be able to get a remortgage.

Similarly getting a BTL mortgage without showing 25% more rent than mortgage is getting harder and harder, you could be effectively blocking yourself from getting a remortgage when the new one expires.

Where is the fixed rate mortgage coming from without fees? best I can find with a 5 year fix has almost £4k of fees + legals per property & as its a portfolio I'm guessing we are talking 3 or more properties.

The so called philanthropic taxman won't give you a penny, he may take less from you, but only if you've got enough rental income for it to be set against.

Capital gains tax, your increased property value is subject to capital gains on the increase - just your 2018-2023 bill is £112k, if you've owned them since say they were worth £500k you've got a capital gains bill of £392k coming if you ever sold, so your actual £1.9m property empire is worth say £1.9m less the £1.14 mortgage, less £392k tax less say £50k in estate agents / solicitors fees etc gives an actual worth of £318k. Pop your clogs & there's inheritance tax to pay so someone would be would be left with £190k.

If you've put your property empire into a trust to avoid the IHT of course you cant just take out another mortgage and walk away with the cash, its not yours - it belongs to the trust.

Similarly if you've done it as a limited company you cant get the cash out without it being taxed.

Then of course you best hope your tenants can keep up with the rent - even at 4.79% you've got a bill of £4,550 to pay every month on property that you only own a fraction of.

Lots of questions there Andy.

First I agree that 60% LTV is safer than 75%. My example was based on 60%.

Here’s a zero fee 60% LTV remortgage at 4.89%. (But you’ll almost certainly have to pay for a valuation).

I think HSBC do similar at 4.79% but cannot be arsed to check. I definitely saw one somewhere when I looked yesterday.

The Woolwich rate is 4.75% if you want to pay a £1795 fee. I would work out the entire cost over five years to work out the best value.

A problem with the Woolwich is they don’t like to remortgage for a cash bonanza. They like to hear that you are going to do property renovations.

Capital Gains Tax (28%) is not payable if you die. Instead your BTL portfolio is clobbered with Inheritance tax (40%) assuming all allowances have been used elsewhere. However, the good news for your beneficiaries is that while CGT is payable on the entire gain, if you have mortgaged to 60%, IHT is only payable on 40% of the property’s value (that’s just 16% of the property’s value).

16% of a property’s value may well be less than 28% of the gain - much will depend on how long you have held your BTL portfolio.

If someone had, say, five properties worth £1.9m giving a modest 5% yield, they’d have a rental income of £95,000 per annum, shared with a partner this would fall into the lower tax band, so plenty of income for a monthly mortgage bill of £4550. And let us not forget that philanthropic taxman who’d give a tax credit of an astonishing £10,921 per year.

 

[The Tall Luthier]

Please find get me started on the Public sector.

Why disgraceful?

Surely the disgrace is how bad the private sector pension market is?

 

[calibeach76]

Why disgraceful?

Surely the disgrace is how bad the private sector pension market is?

Disgraceful because the private sector pay for them regardless while having to self fund their own lifestyle and future savings/ retirement...

 

[pjm-84]

Going to put the kettle on........

 

[The Tall Luthier]

Disgraceful because the private sector pay for them regardless while having to self fund their own lifestyle and future savings/ retirement...

We have twelve million people all eligible for state pension in the uk. All financed through taxation in the private sector.
It seems a little trivial to worry about ‘levelling down’ just some of them.

 

[Amarillo]

Disgraceful because the private sector pay for them regardless while having to self fund their own lifestyle and future savings/ retirement...

I thought that current public sector pensions were near enough funded by current public sector pension contributions. How much is the shortfall?

 

[GrumpyGranddad]

Why disgraceful?

Surely the disgrace is how bad the private sector pension market is?

Wrong I think @The Tall Luther

It is now widely accepted that Public Sector pensions are better than those for most people in the Private Sector. One huge benefit is that Public Sector pension pots are totally immune from movements in the stock market. If the market crashes as per 2008 Private Pensions are hammered, Public Sector pensions are not.

When people talk about enormous Private Sector pensions they always refer to the fat cats at the top of industry or in the City, they don’t compare with somebody working in McDonalds or driving a delivery van.

 

[The Tall Luthier]

Wrong I think @The Tall Luther

It is now widely accepted that Public Sector pensions are better than those for most people in the Private Sector. One huge benefit is that Public Sector pension pots are totally immune from movements in the stock market. If the market crashes as per 2008 Private Pensions are hammered, Public Sector pensions are not.

When people talk about enormous Private Sector pensions they always refer to the fat cats at the top of industry or in the City, they don’t compare with somebody working in McDonalds or driving a delivery van.

Your arguing with me whilst simultaneously making my points for me

 

[GrumpyGranddad]

Your arguing with me whilst simultaneously making my points for me

Ah yes. Reread your posts

 

[GrannyJen]

My two pensions are magnificent.

£521 per month from the government and a fixed £334 per month from BMW. However I am luckier than a lot and every generation has had its own unique set of challenges so thinking they have had it better is futile. At the end of the day my life is about what I make of it, not what I perceive as other generations having it better than me.

My Mum and dad had no choice about being conscripted and no choice if they were told to go and stand in front of Hitlers bullets and when they came home had no choice with moving in with my Grandparents into their one-bed flat with girl in a pram and another in the womb because they had no choice about one of the Luftwaffe's bombs falling on their home. How can anyone look back with jealousy at that sh1t?

Life is what it is.

 

[Amarillo]

I think HSBC do similar at 4.79% but cannot be arsed to check.

Coventry Building Society.

 

[GrannyJen]

Why on earth do we all want to scream in self-pity every time a rule comes in to enhance pedestrian, cyclists, horse-riders safety?

For years until 1996 we blunted the IQ of our kids with lead in petrol. We still do not know what the effects of breathing in petrol and diesel fumes are to kids and probably adults. We do know that in certain concentrations it can kill.

We can all point to the stupidity of pedestrians but a stupid pedestrian rarely kills anyone. A car is a lethal weapon in the hands of a stupid driver.

There is no entitlement to owning a car and being allowed to go as fast as you like along streets populated with those far more vulnerable without a steel cage around them.

 

[GrahamB]

Tbh I am yet to see a convincing argument for the public sector in any capacity and no I didn't clap for the NHS either...

FFS. This is probably heading straight to the Three Cocks, but I just can’t let it go. I assume you send your kids to private school and have never been near an NHS hospital in your life? Do your bins empty themselves in your private sector utopia? And presumably all children, disabled adults and older people live free of all abuse and never need any state help? I guess life is so good there would be no crime and you don't need prisons either. I could go on - but maybe show some respect for the people who bore the brunt of keeping people alive, dealing with the bereaved and carried on working in other essential services while most of the country got paid to put their feet up on furlough.

 

[2into1]

If you have additional property there are still some nice little wheezes to avoid tax.

Remortgage your buy-to-let property every five years to 60% or 75% to take out 60% or 75% of the increase in value *tax free*. And as a bonus the taxman will return to you by way of a tax credit 20% of your additional mortgage interest.

More details please!