What next for interest rates and how bad will it get for mortgages?

Welcome to This is Money Podcast sponsored by Trading212. Download Trading212 app today and open a cashizer with promo code TIM to get the 12 month bonus promo rate of 4.69% turned to bright. Underwater for us and joining me and Simon Lambert today is Lee Boyce and coming up, interest rates are held for how much longer, mortgage rates are soaring, but how bad will it get? Good news for saves though as fixed rates climb, we reveal the best buys, if you're happy to lot your money away, plus how to cash in on the bond market may head even if you're a beginner. We talk inheritance tax allowances if you're a state tops 2 million pounds and should you do a rock us and move to Greece. From property prices to tax, we reveal what you need to know. Don't forget to stay up to date with all the latest breaking money news, just go to this is money.co.uk or download the app. But first, interest rates haven't budged for 9 months after the Bank of England kept them at 3.75% this week, unfortunately though, mortgage rates have 5 year fixes and out their highest level since 2023 and lenders have been hiking rates across the board, so why am I getting more expensive when the Bank of England hasn't done anything? Lee, welcome, Simon welcome, the rate decision, just keep us up to speed, what happened and importantly what was said in the minutes. But yesterday's rate decision came hot on the heels of the Fed rate decision the night before and that is important to put it in context and in the US they voted to raise interest rates and they didn't just vote to raise interest rates, they voted to raise interest rates 12 nil that was the vote and also I think probably you could go 12 1 really because you've got the 12 members of the Fed committee and then you've got 1 very important person certainly in his own eyes, Mr Donald Trump who is very much of the conviction that they should not be raising rates and they should actually be lowering rates and there's a huge amount of pressure from Trump on the Fed being placed on the Fed and the Fed still raised rates. So the question is why didn't the Bank of England, the Bank of England held but the vote here was 6 to 3, that was the split, the minority backing a hike did increase though and it included the Bank of England's chief economist Hugh Pill. So this comes even as the bank is predicting inflation to go up to 4% and the really scary number that was bounded around this week other than mortgages which we're going to talk about in a minute was potentially the energy price cap surging 24% in January, I mean haven't we missed any surging energy so much Simon gosh been so long since energy bills went through the roof and Hugh Pill basically said an increase would send a clear signal of a commitment to hitting the inflation target amid the fog of geopolitical conflict and data noise but Andrew Bailey said there was very limited evidence of the energy price shock spreading through the economy causing second round inflation effects so a rate rise is still on the table it could come before the end of the year it's probably quite likely to maybe come before the end of the year but we might be going on a bit of a diversion path to the U.S. perhaps what people want to know mortgage rates why are they going up what's happening there well the way that banks price mortgages is linked slightly to the base rate but it's more linked to swap rates and so on just what rates in the way the banks borrow money essentially and that rate has been nudging higher and actually this week at the start of the week we saw the five big banks all make big rises to their mortgage rates some of them now are not offering sub 5% rates again which is going to be a worry for anyone that's going to be mortgage in soon or trying to get onto the ladder and there was then separated this week suggesting that the average five year fixed rate mortgage is now high and not seen since November 2023 and so we are seeing mortgage rates now going we had it at the start of the year when the Iran conflict sort of first broke out and mortgage rates started to surge a bit higher they fallen back a little bit over the summer and now they're going back up again and they just surpassed where they were at when the Iran conflict first started and I think that Georgia it's adding to some of the economic gloom that feels like it's sort of spreading this week because as Simon said energy price cap potentially going up by 25% in January just as the cold weather bites that's not great for households that could potentially be enough a few hundred quid a month you're going to have to five for energy but all petrol prices are going through the roof you know there's some four quarts now charging two pound a liter of diesel that is high unledded isn't quite at those same highs there's three quarters of a million people who are coming off of five year fixes from 2021 and 2022 in the next sort of time period six to nine months which some of whom are still on ultra low mortgage rates of 0.9% from five years ago they're you know first like a lot of life and a lot of stuff has happened in the last five years people could be coming to face a seismic shock and how much they're going to have to be repaying on their mortgage now hopefully you'd like to think that they've chipped away at some of their you know some of their mortgage show they won't be remorgaging at as high amount as what they did five years ago and I'd also like to think that especially if you're in this boat if you're one of our listeners or readers that you would have made a lot of sunshine mood at that rate it's probably not going to be that low forever I started tucking away money elsewhere over paying mortgage all that kind of thing but that's going to be another few hundred pounds potentially that people are going to be having to find they said a lot of money it's all starting to build up Georgie it's all starting to build up for households and there's a kind of a broad anchor of glue minerals like this kind of arrived just to put that into a real world context I alluded to this last week when we were talking but I actually know one of these people my little sister her five-year fix rate is coming to an end she has been on 0.99% and she spoke to a broker this week spoke to LNC who does this is money mortgage service you know it's fee-free you can use it you can find out what it's going to cost you and 4.88% is the rate that she has been offered on a three-year fix yeah so she's going from 0.99 to 4.88 they are in the fortunate position where obviously thanks to a five-year mortgage and they've got relatively high equity in the property so it's quite a low loan to value so they're getting some of the best rates that you can get and I think I seem to remember that's probably going to push up their monthly payments by about 350 quid 350 pounds is a hell of a lot of money to have to find extra each month most people do not have 350 pounds knocking around I know for one when I faced a similar thing probably this time last year it was a seriously detrimental hit to the amount of monthly disposable income we had i.e. it basically wiped out most of the monthly disposable income Simon just a quick one on where this is going to head least spoken about a blanket of doom or gloom doom or gloom either way both in terms of interest rates you know is it so unpredictable at the moment I mean I don't think there needs to be a blanket of gloom we've got the budgets to look for too silence list as you could you could have heard a penny drop the absolute silence majority there you're like yep we're not talking about that you can't predict what's going to happen if you take the scenario where president trump comes to his senses somehow this sort of ongoing conflict with Iran that goes up goes down goes up goes down manages to get sorted out then all of a sudden a lot of the things that people are worried starts to dissipate and to go away or you look at it and go actually I'm on trump side and I agree with him we need to crack down on Iran and we need to do something about it and it's right that he's doing something about it in which case this is not going away and it's going to get worse or we just keep bouncing around the middle somewhere which is what we've been doing you know since the conflict started and you know we just don't know I mean you know how bad is the inflation shot going to be at the moment it's not that bad but we do know from recent experience that it could get a lot worse and the central banks are very very keen to stress that you know they are they are going to see how things unfold and they're going to act accordingly they don't as Andrew Bailey said last week have a secret plan and then they're just going to stick to their secret plan but they are going to be quite serious about cracking down on inflation because they got their fingers burnt last time and they were seen as being behind the curve which I think is something that is contributed to the fed raising rates it under you know in the face of such weight not to do so there's one other quite important thing that happened with bank finger in this week and that's to do guilt which we can talk about in a bit so we're not going to too much detail but this could actually have a bit of an impact on the budget and potentially even on the on the future path of interest rates the bank has started to overhaul the way that it's unwinding quantitative easing which was the process that involved it hoovering up loads of very very low rate UK government bonds in order to inject money into the financial system first after the financial crisis and then during COVID. It's been doing something called quantitative tightening, which basically involves selling those bonds back into the market. It's selling them a big loss because the bonds that is bought are very, very low yielding. It's got bonds that yielded like less than half percent, whereas now you could buy bonds that yield more than 5 percent. So people don't want to buy them. So people are buying them at knockdown prices. But what it's also doing is because they're selling bonds into a market that doesn't want to buy them. It's creating extra supply when demand is low, and that's been blamed for pushing up guilt yields even further. Now the fact that it has decided to basically pause sales of guilt for six months and halt sales of longer dated guilt is quite a big thing. It's a boost for John Healy because it could bring down a borrowing cost. But it could also mean that we may be seeing a slight shift in this part of future interest rates off the back of it. And you said we'll talk about guilt. But before we get there, we're going to talk about savoursly, your favourite subject, because it's better news, isn't it? For savers, fixed savings rates have climbed above 5 percent, with the best now paying at the time of recording, 5.2 percent. But is it worth locking your money away for many years in order to get it? Lee, what's going on out there? Oh, what's going on out there, Georgie? Savours are kind of getting a bit of a good deal again. That's what's happening. But you've got to remember, we've had the inflation rate this week, 3.1 percent. So whatever you do, you want your savings to be beating that rate to make sure that your wealth is growing in, you know, actually the power of your growth is of your wealth is growing. The weird thing about it is that 5.2 percent rate, as you say, you've got to lock away for quite a long time. That is a five year fix. That's a West Brom build society cash rise of five years. If you want that guaranteed 5.2 percent over five years, that might be the home for you. But you can get 5 percent on easy access up to 5,000 pounds. It might be a handy little home for you. That's through spring. And then you have one, two, three year fixes that are paying above 5 percent as well. So invest deck, for example, have a one year fix at 5 percent. You've got a minimum deposit of one of 5,000 pounds. You can get 5.0, 3 percent at GB bank and 5.15 percent at West Brom. Essentially rates are improving. There's more competition in the market to who's up savers cash. We saw it recently with the NSNI Hikes because NSNI has been failing to keep up with money going elsewhere. There's lots of competition in the market and lots of homes in which we want to put our cash. Lots of people like to stay with their big banking names. And we talked about this recently on the podcast then with some of the best rates that have been hidden away under other names. For example, Nat West has this first active saver pays 4.05 percent. Nat West itself just under its own name, 4.17 percent and 4.75 percent on one and two year fixed ISIS. Nationwide has got three year fixes at 4.65 and 4.7. So big banks are also involved as well as all these challenges as well on building societies. And you mix that all together and it's good news for savers because you are able to be inflation by a considerable and comfortable distance without having to look to your money for 5 years if you don't want to look away for 5 years. Of course, some people do like to look away their money for that amount of time because they like the guaranteed rate of interest they're going to get. But it is a bit of a risk because similar to Morgan's, it's not completely linked to base rate but it is a big part of the picture for savings. And there are talks of base rate rising potentially once this year and four rises next year. There could be five rises between now and the end of next year. That's what a lot of markets are pricing, that's what a lot of economists say. As Simon just mentioned, that's not completely now done because of movements that are happening behind the scenes with the bonds. So it's whether you think rates are going to continue to go up or whether now is a good time to guarantee this one of these rates and do it. If you're someone who likes the stability, that five year fix actually sounds like a pretty good deal of 5.2%. If you're someone who thinks actually rates might continue to go higher, you might want to get a one year fix or a two year fix, but there's no guarantee you're going to get as good a rate after one or two years. And if you're someone that's a start in the market for these access, there's just a lot more better accounts out there now that are paying between four and a half and five percent, which is going to grow your money and the power of your money because it's being inflation. Lee, there's some bank of England data that 300 billion, an estimated 300 billion has just sitting around in UK current and savings accounts earning zero interest. And if you had instead put it in a 4% account or a rate paying 4%, it would give UK savers 12 billion a year in interest. But that's what banks and building societies and financial institutions are. And Banking on, they want you to be leaving money flowing around, not doing much early and much interest. Big part of that will be people who write to part money in their current account. They like the feeling of having a big current account balance that's not earning any interest, but they just like it there. They just think it's like, you know, kind of a big safety net flume. If there's some sort of spending that needs to be, you know, emergency spending, that kind of thing. And that's, you know, at the very worst, you should open an account, a savings account with your bank, even if it's not the best playing rate because it takes hardly any time. They've got all of the information pretty much that they need about you. A few steps, a few clicks of an app now, and you can probably get a savings account that will, you know, do much better than earning nothing in a current account. And you know, a big fan of regular savers, you can get up to 8%. If you're someone that goes, the thing is I haven't actually got that much to save and getting 4%, 5% on a thousand pounds. This isn't worth it. If no, this can't be bothered. It's not worth a hassle for a few crit of interest every month. Again, that's what banks and boom sites and challenge banks. That's what they want you to do. They want to make sure that there's a big trance for money that's sitting around that's not earning any interest. Again, you just get it in there and just start trying to snowball the fact your savings and build a bit of a pot up rather than just letting it sit around because you go, it's not really going to earn that much interest. There's a, I can't be bothered. It's not even going to cover a cup of coffee over the course of the month, so it was the point. But you have to start somewhere and grow it from there. And I think there's also, to be honest, I think there's a lot of older people as well that kind of have a mistrust of some of, you know, the banking system and whatnot that just basically don't want to move their money around. They don't trust things. But we do have the financials. That was compensation scheme net up to 120,000 pounds of savings. That's a big net for people per bank as well. So, you know, your money is safe as long as you're the savings provider you're putting in as a FCS protection. And make sure that you utilizing your ICER and all that kind of thing and make that £300 billion. Well, I mean, that is an extraordinary figure. Isn't it absolutely huge? Like, how is it that we're at that point when there's so much information that our fingertips and things are so much easier to do these days? You know, I don't get it. Things that I get, Lee, I never understand why people want all their money in their current account. Personally, maybe I'm wrong here, but I think because I use my current accounts so much, the opportunities for scammers and things to go wrong is so much greater than if I parked it somewhere where I don't. And I can't separate what would be like savings and what would be spending. I'd be like, well, that's spending money. I think that's right, Georgie. And I think it's for me personally, it's less scammers that I'm worried about. It's more Simon Lambert. My monthly money management consists of basically taking money away from myself in my current account and putting it in other places so that I can't spend it. Do share Simon. I'm talking about can't spend it though. Lee was mentioning there about how long you need to fix for and what you need to consider. If you're looking at things like five years, should you really be looking at putting it into a savings account or should you be thinking about investing Simon? Arguably not. If you've got money that you can afford to look away for five years, then you should seriously be thinking about investing it. It's unlikely that if you can actually go, that money's going there and I can't touch it for five years, that you are in a scenario where you couldn't consider investing it. There might be reasons. You might definitely need that money in five years time. Investments can obviously go down as well as up and they have a much better chance of beating inflation and the longer you go, the less chance there is that you lose money, but five years isn't that long. Investors are advised to think longer than five years, but you should at least be thinking about it. And I do think there are a lot of people, particularly those with more money, often in the older generations, the kind of 50s and then boomers and stuff like that. You've got huge amounts of cash sitting in savings that they could be investing and earning a better return on. The only thing I would say is 5.2% is really quite a good return. A risk-free return of 5.2% is really, really good. That is a reasonable return to expect from the stock market, but average over time is 7%. So 5.2% is not that far behind it. Walking of 7%, say there's willing to look beyond the banks could potentially get even more Simon U2 this up a little bit earlier UK government bonds or guilds are offering yields not seen, for years with some returns equivalent to, as I said, nearly 7% for higher-rate taxpayers, so could lending your money to the government actually be putting it in the bank? Well, before we start, what exactly is a guilt? Just 101. here. How does it work? A guilt is the name given to UK government bonds. UK government bonds are debt issued by the government for investors to buy. So basically, it's like an IOU. So as an investor, the government says we want to raise a thousand pounds. And as an investor, you say, okay, I'll lend you a thousand pounds. And in return for that, you're going to need to pay me some interest. And that is what's known as the coupon on it. The bonds are issued by the debt management office, which is the official body that's responsible for raising the money that the government needs to borrow in order to keep the economy afloat, keep things functioning and invest for the future. And the debt management office does exactly what it says on the tin. It manages that debt. It goes right. We're going to raise a certain amount of money over on long dated bonds, like 30 years maybe. Once some on 15 years, we'll raise some on 10, we'll raise some on 5, we'll raise some on 2, we'll go it's shorter term. And there's different interest rate on all of those things. Because the longer you lend money for, the less certain you are about what's going to happen over that period of time. And the enemy of your return on bonds, because you know what you're going to get. If you buy a bond when it's issued, you know it will pay you 5% every single year until it matures. The enemy of that return is inflation. And the longer out you go, the more things that could happen to inflation. So the government can expect to have to pay higher rates on longer bonds and lower rates on shorter bonds. Now, you can buy bonds when they're issued, at which point you buy them at what's called par value. So the value of that bond IE 100 pounds. And then you get the coupon, which is say 5%. And if you hold on to that bond all the way to the end to maturity, you will get your money back at the end. So you get your 100 pounds back at the end. And over that time, you've got 5% each year. But bonds are also traded on the secondary market. And on the secondary market, the bond prices can change. And that affects the yield. So if bond prices go down, so if people are willing to pay less than the face value of that bond, then the yield goes up and the other way round. So to give an example of that, if I decide that I'm going to raise some money with a Simon Lambert bond, and I say I'm going to raise 100 pounds, and I'm going to pay 4%. Podcast listeners might go, do you know what? That guy is great. It's credit. It's real good. Real good. Great, you know, credit opportunity there. I'm very happy to lend Simon Lambert my 100 pounds. He'll pay me 4%. So we do that. But then the bonds can be bought or sold in the secondary market. And the long comes Georgie Frost. And she says, I'm going to raise some money. But I'm going to do it at 5%. So I'll issue my 100 pound bonds, and I'll pay you 5%. At which point, investors looking at the two things go, well, I like that Georgie Frost too. She is also a great credit opportunity. They go, do you know what? Actually, why would I buy Simon Lambert's bonds that pay 4% when I could buy Georgie Frost bonds that pay 5%. So anybody in the secondary market who holds my bonds and wants to sell them for whatever reason is going to have to accept less money for them. Because the alternative is the person who could buy them could just go buy your bonds Georgie. So if your bonds pay 5%, and my bonds pay 4%, the way the maths works is for the yields to even out. Someone would only be willing to pay 80 pounds for a Simon Lambert bond. And if they buy that Simon Lambert bond second hand for 80 pounds, and it pays them 4% interest, because they're buying it for less than the face value, they're actually getting the equivalent of the 5% interest. And then at the end, they can make themselves a nice gain because at the end of it, I have to pay them 100 pounds. And the way that works with gilts and one of the things that's very attractive to people other than the interest they can pick up, is that capital gains on gilts are tax-free. So if you buy a gilt for less than it's worth, and then you hold it to the end, the gain that you make in terms of profit, the capital gain when you get the face value back is tax-free. Yeah, I know which bond I'd prefer to buy in it wouldn't be the Georgie Frost one. Why are they paying so much at the moment, and how does it compare with a savings account? Why would you bother? How would you even do it by them? It is easy to do, and investment platforms have seen a big rise in interest in this over recent years, and there are two things that are going on. Firstly, there are people buying low rate bonds that were issued as I talked about earlier during the financial crisis, during COVID, when rates were on the floor, and to put this in context, Joanne Hart has written an excellent article for us about investing in gilts. If you want to find out more, go and read this article. It's on the investing section of our website, right? But five years ago, the government only needed to pay 1% to borrow for 30 years. Today, well, at the time of writing, this has gone down ever so slightly, it needs to pay 5.9%. That's an even bigger rise than we're talking about those people coming off 5-year mortgages, okay? So that's how the environment has changed. And if you can go buy one of those 1% bonds from 5 years ago, you can buy it at a real knockdown price, and then you can hold it to the end and you can make a nice chunky tax-free profit. Obviously, on a 30-year bond, you've got to wait a very long time, but there's lots of bonds out there, shorter dated ones, that people are going out and buying to make those capital gains tax-free profits. So that's one thing investors are doing. The other thing, like some investors are doing, is they're looking at some of these longer dated bonds and going 5.9%. For 30 years, that is a really good return on something that is effectively considered to be risk-free, because basically, the UK government has never defaulted on any of his bonds. And due to the fact that if we need to, we can actually print our own money, we don't need to default on our bonds. So you can pretty much rely on the fact that you're going to get the face value, you're going to get the value of that bond back. What you don't know is what's going to happen to inflation. But people are looking at that as those yields. And like I said, but the savings account thing, they're going 5.9%. That's not that far off what I could reasonably expect from the stock market. I'm going to park a chunk of money there. And then if between now and 30 years time, for example, interest rates come down and bond yields come down, then the value of my 5.9% bond will go up. And I could maybe sell it second hand and make myself a nice tax-free capital gain. So the investment platforms have seen a big, big rise in people buying yields. It's still pretty niche. This is not a mainstream thing. But there's a lot of this that's going on just quickly on the how to buy one. So I'm on my investing app here. There are an absolute ton of options available. How'd you pick? Okay. So there are all different types of bonds. There's different types of bonds with different issue dates. You get index link bonds, which are inflation linked. If you just want to go down the simple route of buying a guilt, you need to look at the coupon on that guilt. So, you know, what the interest rate is that it pays. You need to look at the price of that guilt. So what are you paying for that guilt? IE, if it's a I've got a hundred pound face value, are you paying 93 pounds, you pay an 85 pounds, you pay in 60 pounds. You need to look at the yield to maturity because that reflects those two things. What interest that guilt pays and what you're paying for it. And that's the really important number that you need to look at. It can be a bit baffling. If you don't know what you're doing and you get lost, then maybe buying guilt's direct isn't for you. What you could do is you could invest in a in a bond fund. The problem with bond funds is generally the actively managed bond funds that you get. They're not doing the same thing as buying a guilt direct and then holding it to the end to just pick up that interest rate. They're trading bonds. They're buying in and out of bonds in order to try to deliver either a certain amount of income or a certain amount of growth. So it's constantly moving around. It's not the same as going, I'm just going to buy that guilt and I'm going to hold it. What I think is a middle ground potentially is something that I didn't know existed actually until the other week, which is quite interesting. So I shares has an ETF. The I shares over 15 years guilt index fund. What this does is it targets guilt's over 15 years. So the yield to maturity across the portfolio at the end of August was 5.71%. Now this is an ETF. So it holds a bunch of guilt. It's got 27 different guilt in it. It does obviously come with some costs for holding it, but I think the charges are super low. They're like 0.1% or something. Lots of people know how to buy ETFs through their platforms. So that gives you an alternative option. Now it's not the same as buying a single guilt direct, but you might think actually to know what if I were to buy this ETF right now, I think the yields are probably going to come down and then the value of that ETF is going to go up. But as ever, this is not advice to go out and do something. This is just explaining something. If you do want to buy guilt and you do think this is interesting, go do a lot more reading about it and start with JoAnne's piece that we've been last weekend. Moving on, read a question in time. My husband, sadly died in 2013 and left everything to me. Now when I die, all my assets will pass to our children, which in theory gives us a combined inheritance tax free allowance of one million. However, our home is now worth about 1.7 million, and my savings investments in SIP would take me over the two million mark at which the residents' nil rate ban starts to be removed. Is it only my residents' nil rate ban that is tapered away when my husband's remains intact from his death? Or will his unused residents' nil rate ban be whittled away too? And I risk ending up with an expensive inheritance tax trap. Lots to unpick here. First explain why you would get to one million. Then explain the two million threshold for me if you would. Right, the standard inheritance tax allowance is 325,000 pounds. That is the amount that you can pass on free of inheritance tax when you die. And anything in your estate above that is liable for inheritance tax. But a married couple can get to 1 million pounds. And that's because they can pass assets to each other, free of inheritance tax. And if the person who died first hasn't used any of their inheritance tax allowance, the unused inheritance tax allowance passes that other person as well. And on the second death, it then goes to their estate and it's allowed up to that amount. So if you take your 325,000 pounds, that can be doubled to 650,000 pounds if you're a married couple or a civil partners, and you pass on your unused allowance to your spouse who then passes it on on their death. But there is an extra 175,000 pound inheritance tax allowance per person if you pass your own home onto a direct descendant. So, and that's called the residence nil rape band. And that can also be doubled up. So if you double up the two 175,000 pound allowances and the two 325,000 pound allowances, you get to 1 million pounds, which is the maximum amount you can pass on tax free as long as a 350,000 pound chunk of that is your own home being passed to a direct descendant. And that's either a child or a grandchild. - Super duper, but at 2 million, the residence nil rape band starts to be removed and therefore you have this issue going on. We're gonna have more of these problems, aren't we, Lee? We've already seen inheritance tax becoming a greater issue because of rising house prices. Now we've got the whole pension issue coming down the line next year. They're gonna be more of these sort of questions, aren't they? - There's gonna be tons of these sorts of questions, Georgia, I suspect. And especially as more people cut them on because you gotta remember some of those that were in this industry and we kind of live and breathe it and we kind of know all of the changes that are happening and everything that's going on. Sometimes people do bury their head in the sand and don't really kind of fully grasp the concepts of what's going on until it's really like on the date or afterwards. So from April 2027 in a nutshell, pensions are gonna be included for inheritance tax purposes and it's gonna likely double the amount of estates that are gonna be in inheritance tax scope. And as Henry Atter-Grimson here, the charter financial planner who is the off-world manager, so what's his answer that she said, the case she was just talking about this, this is what is such a big concern around changes to the pension rules because it's too full. Essentially not only does the pension not come into the estate for inheritance tax purposes, but many people could also find their residents, Neil Ban, starts the tapers as a result. There's lots of little nuances and things that are probably gonna come up from this. And people, we've been actively encouraged to say into our private pensions to try and have a comfortable retirement. And I think this is what the kind of mumblings and kind of within the industry to kind of issue with it is that, we've been told this and then you're moving gold posts. You know, you look at this and you go, one of the estates worth 2.7 million pounds. I mean, you know, inheritance tax, whatever camp you sit in, you can argue that inheritance tax is fair as our unfair until the cows come home, but you start to put a pension into this whole mix and it starts to affect a whole lot more people. And I think it's gonna change behaviors in retirement. Again, rightly or wrongly, maybe people will spend more, you know, they will look at this and go, I don't want the estate to be the tax massive chunk, just go straight to the tax man. And you know, it's not probably gonna have anymore 'cause you're dead, but the forward planning, you want your family to benefit as much as possible from what you have in your estate and also live a pretty good life, I would say. Again, there are lots of other factors and things that play, I've been thinking about this loads the last couple weeks, conversations I've had with extended family members and friends, for example, over the cost of care. I mean, I cannot believe the cost of care in this country is absolutely astronomical. Some of the sums of money that I've been told about monthly are absolutely sickening, I mean, absolutely mad. And I know it's completely different topic, but you know, it's, there's a lot going on, there's a lot to one pick, but I think pensions included in its estate from April 20th, 20th, 27th, you hit the now on the head, right, right, let's start the questions to be there. There's gonna be so many people who are gonna have questions about it, are gonna wanna know what to do. And we're seeing it, we've been seeing it for the last year, the last six months of a year, people getting in touch with their questions, 'cause they're quite baffled by it to be quite frank. - I still think, especially with the pensions one, there's still a few things to iron out, the double taxation over 75. I also think that you probably shouldn't include pensions for anyone under 65, but anyway, that's just me. Simon? - So, the answer to the question is basically bad news for our reader who has sent this in. The own home allowance, as you said, Georgie earlier on, starts being removed if your estate breaches two million pounds, and that's at a rate of one pound for every two pound above the threshold. Now regular listeners may hear the starts being removed at a rate of one pound for every two pound above the threshold, and hear alarm bells going off in their own heads. What does this sound like? One pound for every two pound above the threshold. Yes, this is the inheritance tax version of the 60% income tax trap. How well does that work? Well, it's not great. It's also another example of a tax where the allowance has been kept to the deep freeze for many years, whilst things are going up. And actually, this is something that if you add all of the different elements and ingredients together is worse than the 60% tax trap, which I'll go into in a minute. Now, I'm not going to try to make you all feel sorry for people whose the state's over for more than two million pounds. However, the answer to the question is, unfortunately, the fact that the reader's husband died in 2013 and left everything to them does not mean his unused residence nil-ray bound is protected from tapering when the reader in question eventually dies. If the first estate was less than two million, the full allowance can be transferred, giving potential combined residence nil-ray bound of £350,000. However, if the second estate is more than two million, this would be subject to tapering. For an estate worth 2.5 million, for example, this means the tapered residence nil-ray bound of £100,000, it's been reduced, remember? And then when you hit 2.7 million pounds, it's gone altogether. Now, 2.7 million pounds is a lot of money. But the way that all of these different pieces fit together for people who were pushed over that two million pounds by a pension and die after the age of 75 means that they would face eye-watering effective tax rates on that pension when it is left to someone of up to 91%. And the way that works is basically, you're seeing the residence nil-ray bands being removed at a rate of £1 for every £2. You're then seeing the pension being pulled into inheritance tax when previously it was inheritance tax-free. But you're also seeing income tax being charged on withdrawals on that pension if someone dies after the age of 75. And this is something that I would have hoped that the government would have done something about because I think if you're going to pull in pensions into inheritance tax, which some agree with some don't, I personally don't think they should be, I think they're two separate things, right? But if you're going to do that, then what you should do is remove the income tax on them. You should not be double taxing people on them. But the double tax alone delivers about 62% hit. But for those people caught in this on the threshold of this two million pounds thing, it creates a 91% hit. And you might go, hey, you know what, if you've got an estate worth more than two million pounds, well, bully for you and you deserve to pay a load of tax. But the same effect doesn't apply to someone who leaves a 10 million pound estate or a 20 million pound estate. They're not facing those same effective marginal rates of tax. And I do disagree with these bits in the tax system where basically people with less are effectively paying way higher marginal tax rates than people with more. I think that wasn't really what it was meant to be for. Wasn't it supposed to be hitting hard? Those people were 10 million plus the multi millionaires and billionaires. But it seems not because you know what they're doing. As Batcha says, where were they? They're leaving the country. They're upsticks and offering to places like Greece. Because for Simon's day after the week last week, he gave us 330 million pounds. Now that was the amount that hedge fund billionaire Chris Rockers reportedly paid in tax. in 2025, but unfortunately for the Treasury and ultimately for us, Britain's third top taxpayer has, as I said, upsticks and gone to Greece. Why? Well, it's quite attractive. In June, Henley and partners placed Greece among the world's most competitive jurisdictions for the wealthy. So should you, particularly if you have deeper pockets, consider them move. And what was the reason given for Chris Rockos to leave? I know if he's given a full reason for it. I don't think you can kind of really pinpoint it, but what you can sort of say in a broad way is that he doesn't believe it's an attractive place to run a business anymore and that Greece has sort of loosened rules and it's been more attractive to go and do business out there, just given the high tax kind of system that we have in this country. And as the side of the Greece is the place for him. Now, I should point out here that moving to Greece, as a, let's say middle class family, it's going to be completely different to someone who is making, who is a hedge fund billionaire. I think you've got to make a big kind of leak to go from, you know, someone with assets of half a million to a million to someone who is a billionaire. But to do a Rockos, I think it's quite a good headlight. You know, should you do a Rockos? I mean, should you, should you upsticks and go to Greece? Love Greece, the Greece is a wonderful country, great climate, lovely food, friendly people, redisively cheap depending where about you are. If you're in a tourist track, probably not so much, but if there's lots of little islands, beautiful country, lovely place, Greece. And I would say if you are someone that's tempted to leave anywhere abroad, but let's stick with Greece, the first thing to do is to speak to vetted specialists, legal experts who can really tell you your ask for mural, but basically what you need to know about moving to Greece, because there's all sorts of complexities like there are in this country around buying a home, the taxes that you need to be aware of, the legalities, all of that kind of thing. But let's talk about it broadly. The first thing is you've got to think about your residency. You know, we're not in the EU anymore. So what you can do and where you can live has changed. And you know, financial barriers to entry, you know, have changed and it depends from region to region. So you want to, whereabouts, you've got to do research and know where it is that you want to buy. Then you want to go and find out what it's going to take to do that and what you can do as a, as a kind of non-resident of Greece and whether you can apply for residency and all of that kind of thing. Very different from just buying a holiday home and going out there from time to time and not breaching that 90-day rule of staying when you can't. So again, that makes Mr. Rockos in a completely different sphere to ask me more tools. Some of the tax traps and benefits and things to think about Greece. So one of the big reasons why it's become a attractive to wealthy people is because of the tax benefits to the country does have generous tax rules for wealthy foreigners and the overseas income. And in June, it introduced new tax rates specifically targeting venture capital funds and hedge funds as a part of a drive to get more wealthy people from Britain, Switzerland and the UAE. Or again, that's probably why Rockos has gone and done this. It's tax of bonuses and dividends in the financial sector has been cut to 5% from 15% and the one condition of that is that the company has operating expenses of at least 3 million euros per year in the country. So again, you can see why if you were a business owner or someone would kind of make a lot of money while this is quite good. But again, if you're a mere mortal, this is why you have to go and get the right financial and tax. But at residency, it makes really not going to outstate your residencies and all of that kind of thing. And also, golden visa is another thing that you can consider and think about whether you're going to be investing enough in the country to qualify for a golden visa. One of the things I think quite like about this as well is the climate. We obviously, Brits on the whole, Greece is one of probably our top 10, right? I would probably just put it in that top 10, just about for a holiday destination. And we tend to go June, July, August, September, but incredibly hot. I went last July to Crete and it was stifling. It was between 25 and 14. Incredibly hot. But it does get cold in that it's a very big country and it does get cold in the winter. But we kind of get tricked down because we think it's this whole year round because it's what we've used to when we've gone there. But you're going to get 46 hours of sunshine a day even in winter, which is the big appeal. And I've actually thought about all of those things, Georgie. You've contemplated those things. You've spoken to your experts. You've done all your homework figuring out how much money you've got, how much you would potentially buy a property for all that kind of thing, is looking on what's for sale. And you could spend, I mean, I could spend weeks just looking at properties for sale in any overseas country. But Greece does have some very beautiful places on the sea, on the coast, pools, you know, full-kit and caboodle for your overseas lifestyle. And you're getting shopping and having a look. But it's a massive leap. I think it's a massive leap for anyone to move forward, especially with a family or a young family. And it takes a lot of research, the more research to better. And actually, I think probably the best thing you can ever do in a situation like this is actually find a British family who have moved to Greece and can give you the warts and all kind of experience of what to expect, what they learn from it, and what the good things, the bad things, all of that kind of thing. The job that is with that is that you can end up just talking to yourself out of it, like a lot of things in life. You know, you can think about these things for months, years, and never do it, and then live with regrets. Or you might just be someone who just takes the plunge, does it, and even loves it or aches it. It's a big, big, big decision. And I think, again, I think a lot of our viewpoint is skewed from, like, television as well. So you know, these programs, like, homes in the south, look at that thing, you know, make it look very sort of glossy and easy and all that kind of thing. But in reality, it's not. And there's probably lots of, I haven't really investigated this, but I would kind of predict that there would be some books on the topic and lots of forums and things that you can go and immerse yourself in to go and find out whether or not moving to Greece is the right decision for you. It's someone who's moved a few times in life abroad. I would just say, be patient, give it time because there will be things that come up that you don't expect. And you can speak to people and prepare all you like and you can go and dick-duck and watch lots of videos about it, but nothing beats what it's actually like being in a country. And there's a little insight into my brain while you were talking Lee, I was curious. What is the lowest temperature ever recorded in Greece? And it was minus 27.8 back in 1963. So yes, Lee, you were correct. So I'm going to start out the week. Seven. It is still possible to avoid the energy price cap hike on October the first, but there are just seven fixed rate tariffs that do that. The fact that there are still seven fixed rate tariffs that do that is good news, however, because it means that you could try to switch your energy bills. Now, you could save yourself a bit of money from October, but also more to the point, there was this suggestion as we mentioned earlier in the show that the price cap could rock it up by 25% come January. So if you can lock in below even October's rate, I would seriously consider doing that now. I'm going to thank you, Lee. Thank you. And thank you for listening. That is all for this week. You can keep up to date with all the latest breaking money. Just go to this is money.co.uk or download the app. And if you have any comments or questions for the team or anything you'd like them to look into, Simon. Email us at podcast at this is money.co.uk. We had a really good email last week off the back of us talking about early retirement, something that we're going to dig into further, talk about whether you should be clearing your mortgage early, some stuff for kind of like quite sophisticated, you know, financial management, but the kind of thing that might interest some of our more geeky podcast readers. So email us your comments, email us your questions, tell us what you think podcast at this is money.co.uk. And come to this is money.co.uk/podcast to find all podcast paths, join the debate and read the comments. And also sign up to our newsletter as well. And you will get the important stories that you need to know about every single week straight to your inbox on a Thursday morning. This is money.co.uk/newsletter. If you like the podcast, you should definitely get our newsletter. You should. If you don't get a podcast, why not rate us wherever you found us helps other people find us too.