How do you solve a problem like student loans?

0:03Welcome to This Is Money Podcast, sponsored by Charles Stanley Direct. I'm Georgie Frost and joining me and Simon Lambert today is Helen Crane. And coming up, student loans. The slow motion car crash we've been warning about for years looks close to impact. Have we reached the point of no return and what happens next? Elsewhere, the Bank of England held interest rates, but it was a knife-edge decision. What does it mean for your money and where will they head next? Plus, what is happening with Bitcoin? Why now might be the time to overpay your mortgage? should you boost your avios and Selfridges gets a dressing down with Crane back on the case.

0:39Don't forget you stay up to date with all the latest breaking money news. Just go to thisismoney.co.uk or download the app. But first, have students been missold their loans? That is the question all over social and indeed traditional media at the moment. The row has completely blown up. But why and what will happen next? Now, Helen, as the youngest here, confidently youngest, student loans, what are we talking about here? It's getting increasingly rare that I'm the youngest person in a room. So I'm loving that, Georgie. That's great. Why you come on? We make you feel young. I know. So student loans.

1:25So this has been bubbling away for quite a while, I think. And the reason it's been happening this week is that someone has kind of spoken out again. So this is the former director of the Office of Students, a man called John Blake. He stood down last month and he's kind of spoken out about the unfairness of the student loan system. So that's why it's sort of on the news agenda again this week. But it's kind of been snowballing a bit because I think people who are on these Plan 2 student loans, so Plan 2, several different student loan plans, but Plan 2 seems to be where the real problem is. So this is people who went to uni from 2012 to 2023.

2:12And they're seen to have the most unfair repayment system. So they repay 9 % of their income. That's the same as people on other plans after they earn£28 ,470 a year. But it's the interest rate that's the real kicker. So on these loans, the interest rate is variable and it's RPI inflation plus up to 3%. So that could be incredibly high. Just sorry, I've got to backtrack there. As someone who's got a mortgage under 4%, I think I would be rather peeved if they were like, yeah, we're going to just stick a 3 % on top of it. Why? Just because we can. Like, I don't understand the mathematics around all of this and why they decided that that would be a good idea.

2:57and RPI, of course it's RPI because that's the higher. Thanks very much. Where did that come from? That's ludicrous. Yeah, it's extremely high. It's not really comparable to other types of loans. The plus 3%, it seems quite arbitrary, doesn't it? I mean, obviously, the government has to make money on all these loans that they lend out to students. They're not doing it out of charity. But, you know, compare it to the group who came before. So I just missed out on this plan two scheme. So I finished university in 2011. So I'm on plan one, which, you know, I don't like repay my student loan, to be perfectly honest, but the system does seem a lot fairer.

3:44So for me, it's still 9 % of income, earning over about£26 ,000 a year, so a little bit lower but the interest is calculated differently so it's the lower of either the bank of england base rate plus one percent or 3.2 percent so it's much less than people who went to university a few years after me and they also paid high fees is the other thing to mention so i paid about three thousand pounds a year they paid nine thousand pounds a year so it's this particular group that seems to be really hammered and i think you know those are people who are now in their late 20s early 30s you know they're getting to a position where you know they're maybe earning a bit more and they're really starting to notice the impact of those payments on their paycheck and they're really thinking oh do you know what this is actually this is quite a lot and I think every time we talk about this we have this conversation of you know 17 year olds at school or college are told oh don't worry it's student debt's not real debt it's you only repay it when you can afford it exactly exactly which you know it is true you're not going to be sort of chased down for your student loan I mean only in sort of very rare cases you know you do only repay it when you have a job when you're earning over a certain amount but it is real debt you know it is when you get a mortgage you have to declare your student loan is it's not made up it's you know it does it does this and it does I think it's described in a way that you won't even notice it.

5:15You know, you'll be a grown-up then and you'll have loads of money and it'll just, you know, it's talked about as if it's just kind of magic money tree money that won't sort of matter to you. But I think people in this group are now realising actually it does. This can be hundreds of pounds a month. And Frank, I think people think, you know, it's quite unfair. I think the really sort of depressing thing that I'm seeing, and I keep mentioning my mortgage only because I'm quite new to this game, right? And I remember getting the first year of my mortgage thinking, wow, did I even touch the sides of that?

5:47No, not really. But at least eventually after years, you do go, OK, well, I can see I'm paying this down. The problem with students, it seems at the moment, is that their debt just keeps going up. They're paying it back, but the debt is going up because of the interest. And I understand you need to earn somewhere between 60 or 70 thousand to even start to pay it down. on, that must be enormously demoralising. That's the thing that kind of gets me. And I want to get Simon's view because, Simon, you have a couple of daughters. I say that like a couple of cats. You've got a couple of daughters. I know they're a few years off university, but this must be something that is playing on your mind, that if your daughters decide that they do want to go to university, what decisions are you sort of thinking about here?

6:33Would you consider paying for them? it's a very difficult decision the problem with student loans and the difficulty in unpicking this is that you don't want to put someone off going to university completely for financial reasons that's always been my issue with this i have always thought that this student loan system was terrible the plan two student loans i mean the plan three aren't really very good either the plan two student loan system was terrible and i wrote about this at the time talked about this at the time i said it this is this is a bad deal the difficulty is you don't want to be so vociferous in that that someone goes oh well i'm not going to go to university then because because of this and i think that then becomes the thing with with your own children as well like the idea of them leaving university with you know 50 grand's worth debt that they might never pay off and they're going to get effectively an extra 9 % added to their tax rate for 40 years and they might never even pay off the debt is I mean that just goes against so many things I mean first of all this whole like well don't worry you might never pay it off I mean what kind of financial lesson is that to teach 18 year olds take on this massive debt that you can never get away from it's a very high interest rate because let's face it rpi plus three percent is a very high interest rate okay that's more than you pay on a mortgage now a mortgage is secured debt right it's secured on your home but a student loan is secured debt as well because it's secured on you you can't get rid of it it isn't like a personal loan or a credit card which is unsecured debt it is more like a mortgage because like we might not be on some bricks and mortar that someone could repossess you know but it's on you and it's on your earnings and the only way you're going to get away with not paying that 9 % is if you keep your earnings really low for the rest of your life, which is probably not going to work out that great for you.

8:28So I think there's a real issue there. But then if you do pay for them, A, that's a huge sum of money. And B, one of our columnists, Andrew Oxlade, wrote something really interesting on this sort of a year and a half, two years ago, when he was trying to think about the same thing for his son. And he's going to write as a new column on this as well, updating, you know, on what's happened since, is that there's kind of safety in the herd, right there's safety in numbers Andrew wrote at the time this student loan system isn't very good but there's going to be probably a reckoning and at some point there might end up being something like a reduction in the rates a debt write-off or something like that and actually you know maybe it's better to just be amongst the pack in the herd for when that happens for when it gets to be a better deal I mean you know it's a difficult one what I really should have done is what Lee has been doing which is setting aside a small amount every single month to build up a pot that means that his girls are going to have some money that can then you know pay for their university it mine are older my kids are 15 13 now i'd have to save a lot more money but i would definitely consider if we are in the situation that we are in now and bear in mind that we've now got plan three loans not plan two ones and the plan three ones aren't quite as bad as the plan two ones actually apparently we might be on plan five looking at the internet while i'm talking i don't know i don't we've got different loans now whatever they're called which sums it up because if you are going i don't know i don't know imagine being 17 i'm going yeah so let me just run through my problems with the student loan system right firstly when i took out my student loan and i was i went to university in the first year that fees were charged the fees were a thousand pounds i'm very sorry to all the people listening to this who paid a lot more for university than i did and we were charged we were told that our student loan basically had no real rate of interest it was just charged at inflation so the idea was that it would never get you know bigger in terms of like you know you know it's not going to rise due to the interest being added it's only just going to stay the same due to inflation now i could just about understand what was going on there and potentially what i was signing up for because i happen to have done an economics a level right i also didn't go to university straight away if i'd gone to university straight straight out of school i wouldn't have paid fees but because i didn't go for a year i didn't end up paying fees so i had a little bit more of the kind of real world experience you know i spent a year working and doing various things but i still don't think i fully understood what i was signing up to i don't believe that 90 percent of 18 year olds signing up student loans have the faintest idea what they're signing up to so that's that's an initial problem then this rpi plus three percent as you said why are we using rpi it's not an official uh inflation statistic anymore the official inflation statistic is cpi that's what the bank of england targets um that's what we use to define the triple lock you know at the other end and so on we should be using cpi because rpi is traditionally higher than cpi secondly why are we adding three percent that's we shouldn't be doing that.

11:56It should just be the inflation rate. We should just have continued with there being no real rate of interest. Finally, this threshold that you start paying it back at. Now, we've got a problem here because the lower you set it, the more likely people are to actually clear their debts. The higher you set it, the more money lower earners have in their pocket before they suddenly get hit with a nine percent repayment so we've ended up with a bit of a pickle and the reason why we're in such a pickle is because of the interest rate that's being charged on the loans and obviously the size of the loans so we've done two things we've made the loans much bigger because tuition fees went up by so much now that's a separate argument we've then charged people a load more interest on them another thing why are we charging people interest on this from the moment they start their course okay for a bear in mind that three-year university course you aren't even going to be able to be making any repayments in that time you're not going to be earning you shouldn't be charging people interest until they finish their course i don't think and then you know on top of that there's as i said there's the the write-off thing it was 30 years it's now going to be 40 years you're basically saying to people you're gonna pay a load of money but don't worry about it you might never pay it off i mean you might say oh that's a good deal you might never actually have to clear the debt but most of the debt is going to be generated by the interest that you're being charged which is way higher than it should be um and the interest rate you know should just be inflation to be honest and also that's so demoralizing as you said it's like oh yeah i'm so basically i've got this you know this weight around my neck that i'm you know paying all this money and at the end of the day it's not even going to clear the debt and what's happened in recent years is that threshold um that's been messed around with it started to become a way of raising more money cynical no it is it is i you know cynical with rachel reeves freezing the threshold which basically said well look you know we're we're doing it with the tax thresholds you know it's kind of like we're all in it together kind of thing that's not the language of um that's not the language of this is a loan to pay for your education and we're sharing the burden of paying for your education that is the language of this is basically another tax and that's your tax and if we want to have a graduate tax instead of a student loan system we should just have a graduate tax instead of a student loan system what we shouldn't have is something that is in the middle and is just giving people a bad deal and what has happened here and maybe rightly or wrongly you know but we need to have a proper debate about this is we've shifted a lot more of the burden of paying for higher education university onto students and away from the state now when i did that economics a level we talked about education and about education effectively being seen as you know it's something that was good for society the more educated people are the better a workforce you have the better the growth you have you know and various things like that it's an economic good and we have we have shifted away from it being a right we're just going to do education because it's an economic good to all go get a degree and you pay for it and we've just slipped into this mess and what's really interesting is i think it's just it's just like the frozen tax thresholds the 60 tax trap the child benefit removal is you can get away with this stuff for a certain period of time and then you never really know what the thing is that that triggers the sudden you know the final straw moment the tipping point and then all of a sudden it becomes a big issue i mean i spent a really long time writing about fiscal drag and trying to get people interested in fiscal drag i spent a long time writing about the child benefit removal and trying to get people to be interested in that spent a long time writing about the 60 tax trap trying to get people interested in that general vibe was fiscal drag boring child benefit removal yeah well they're earning loads of money let them pay for their own children 60 tax trap they're earning even more money sod them and then all of a sudden it changes and then you start to get a totally different sentiment of fiscal drag this is outrageous what do these governments think they're doing to us child benefit removal this is ridiculous this is a crazy system stop doing it 60 tax trap nobody should ever be charged 60 tax and then get a lower tax rate when they go further up the income scale and then once you reach that tipping point you've got a problem and i think that's where we're at with student loans we have a problem yes we do a couple of things to what you said i think we do need a grown-up conversation about what education genuinely means for the country.

16:55Is it an economic good for the entire country, or is it just an economic good for individuals? Because we can't then be surprised that these individuals who are getting their doctor's degree and nursing degree are leaving the country and taking their degrees and their education elsewhere for the benefit of other countries. I also think it's very difficult when you have that sort of demoralising repayment figure to then tell kids, oh yes, kids, but remember to pay into a pension. Yeah, don't opt out. Remember to invest. Remember to save. What about buying for a house? Wow. The things that they have to do.

17:26And that comes from the mouths of people like, no disrespect, my parents, who have none of that context with which to talk about this. So there's a lot in this. But final one to you, Helen. As Simon beautifully pointed out, and I like to use this phrase, we're in a bit of a pickle. How do we unpickle ourselves with this one? Well, it's extremely difficult, isn't it? Because people are at all different stages of this process. You know, you've got students who are still at university, just taking out their loans. And then you've got people like me who are, you know, a few months away from paying it off.

18:01So what do you do? You know, if you bring in a graduate tax, who pays that? Do people who've, you know, graduated when fees were£1 ,000 like Simon, do they pay? Do I pay? Do, you know? and do they all get a refund? People have already paid off their loans, exactly you know, what happens and what about all the interest they've already paid it would be incredibly complicated to introduce a graduate tax I think, yeah, to even begin to work out how that would happen I mean, I think it would be almost impossible I mean, it would be incredibly popular if they could find out a way to do it but no, I think given the state that things are in, in this country probably refunding a bunch of students student loans or interest payments is unlikely.

18:44But then what do we do? You know, do we just come up with another student loan plan for new students? As Simon said, they're so confusing. And it's probably not going to be incredibly helpful either. I really don't know where it goes. I mean, I think in reality, what is probably going to come of this is that the gap between students who have help from their families and students that don't is just going to widen and widen. You know, I remember when I was at uni a lot of people you know their parents would pay for their mobile phone bill or they'd pay for their car or whatever and I think we'll now see a lot more students whose parents are paying their fees you know if you're a parent who's got the money and is able to it seems like an absolute no-brainer but then you know where does that leave those students who who kind of don't have that privilege I think it's so sad and I think you know the whole loan system I guess or the maintenance loan system at least was designed to help people who didn't have, you know, sort of family backing to go to uni.

19:42And it's kind of ended up going all the way back the other way, because it's kind of not enough to cover things. It's an incredible sort of burden of debt. And I think, you know, it is starting to put off young people again, from going to uni conversations like this. And, you know, a lot more young people looking towards things like apprenticeships, which is, you know, possibly actually a good thing. It's not a bad thing, but you don't want people to be doing it because they just don't have the parental backing and it makes me sad because there's absolutely no way my parents would have been able to afford to help me university was brilliant you know it was a great experience there was a life experience alongside an educational experience and i feel that's just so sad if people are not going don't get me wrong you know let's not have mickey mouse degrees and you know having apprenticeships and all that sort of thing is a fantastic option yes yes let's promote that but well i think it's it's a great experience but what i would say is that i also think that we've shoved way too many people into going to university and actually they're getting quite a bad deal.

20:47You know, in terms of, depending on what you study, you know, you could spend almost all of your week in university or you could be like I was with my English and, you know, philosophy degree at a proper university at Leeds where I think the maximum amount of hours I ever had was eight hours a week and at one point i was doing five there was one at one point in my final year my entire week consisted of i think like two days when i had to be in the actually in the university and like most of it was on one day and then there was an hour or two on another day which was a real bugger because if you missed that one day you were like oh jesus i've missed a pretty much whole week but i i mean i felt you know at the time and i wasn't paying any hardly any money compared to what people are playing now to be honest i feel a bit let down by it i went there because i wanted to you know to study and to learn they're like well you know you can you it's all about study yourself you know and it's like well i could do that at home and you could have a great experience by just online you know what i'm going to spend three years working but i'm just not going to work too hard just going to have a great time instead of being three years where i'm going to focus on building my career from the age of 18 i'm going to spend three years just you know just doing whatever doing trying out a few different things and you could probably have a similarly good experience i would argue you know unfortunately we at the moment we've burnt this bridge i would say get out of the country go work in europe i went to university after a year i did a snowboard season and i went the next year my sister did the same thing my brother who was not particularly academic at school and wasn't going to kind of wasn't going to go to university he i think he did about three or four three seasons and then went to university because he actually decided actually now i do want to go to university and he is the person who came out of university with a first unlike either me or my sister and my little sister she didn't she didn't go at all she she spent three or four years working in in the alps in verbia had an amazing time and then went into work she had a great experience but she also doesn't have a 50 000 pound student debt but the other thing i would say is i'm going to put this in the podcast article right i think the real the problem here is okay the tuition fees but the problem here is the interest rate that's the thing they could do something about and i i'm looking at the moment at a picture of interest rates for all loan types running back from 1998 to 25 26 it's a chart it is totally bonkers the way this interest rate moves around i mean you've gone from like plan one which was like the early days ones at one point was zero because of like rates being on the floor and inflation being like practically you know below zero but then it goes up as high as you know six percent you've got plans two and three and five which is what people are on now by the way because plan three is postgraduate loans going up to eight percent it's all over the show and if we can give pensioners a triple lock because why should they be penalized for the government and the Bank of England's inability to control inflation.

23:51Why should you penalise students for that? And also, it was interesting, you were talking there about not everyone should go to university. I was reading some universities are handing out 60 % firsts. What does it mean anymore? Do you know what I mean? My God, I think about two people got a first when I was at uni. I wasn't one of them. Anyway, we're going to leave this to one side because I'm pretty sure this is going to rumble on. But the Bank of England opted to, talking about the Bank of England opted to hold interest rates at 3.75 % this week, but a cut in March is looking increasingly likely.

24:24But it was a very close call, wasn't it, Helen? My goodness me, it could have gone either way. Well, it wasn't going to go up, that's for sure. As in, it could have been cut, but it wasn't. Tell me, what happened? 5-4, such a dramatic decision. So they did opt to hold them, And I think that was expected, but it certainly wasn't expected that it would be so tight. So four members voted for a cut to 3.5%. And I think that shows that, you know, it's still quite up in the air as to what happens to interest rates this year. So the next decision is on the 19th of March, and it is quite widely predicted that it will be cut then.

25:08So part of the reason that it wasn't was that we had this slight rise in inflation in December, growth still sluggish. So yeah, they decided to hold for this time, but maybe one or two cuts coming later in the year. So what does it mean, Simon? What does it mean for your mortgage, for your savings? I mean, savings are not good, isn't it? Well, savings rates are actually looking pretty healthy, considering the fact that the base rates at 3.75 % and you can fix your set fix your savings at more than 4 % you can get cash iso at nearly four and a half percent you know savings rates have held up incredibly well considering what's happened with the with the base rate but that's only if you go out there and you find the best new deals if you're on some kind of legacy account that's seen the rate cut down to one percent quietly in the background then you need to take control of your finances and jump ship and find yourself a better rate and the easiest way to do that is to go to thisismoney.co.uk k forward slash save where you will find our savings tables that detail all the best rates if you've got a mortgage no change on your existing mortgage even if it's a variable mortgage because the bank of england held so if you're on a tracker there's not going to be any change if you need to remortgage then the bad news is is that the the mortgage rate cuts that we've seen have stalled and then gone into reverse over recent weeks it's not quite clear why um but i think it's really just because rates actually came down by so much and there was a bit of a well not a bit of there was a full-on mortgage price war at the tail end of last year and the start of this year and you know it looks like maybe they stoked up enough demand and they're just pulling back for a little bit but you know if you do need to remortgage you can usually lock in up to six months before the date of your deal so have a look now um see what the best rate is that you can get consider securing it and then you can always switch to a different deal if a better one comes out before you need to remortgage just say that you want to add the fees to the loan and that means that you don't pay them up front so you won't lose any money and use a good broker and if you want to check the best mortgage rates go to thisismoney.co.uk forward slash mortgage high from finder is your monopoly money simon on a march cut i don't know it was close i think they're very much in wait and see mode i think we could get a march cut i think it's possible we could get a march cut unemployment is you know ticking up inflation is ticking down the other thing the bank of england's watching closely is waging wages wages you know they're not looking anywhere near as strong as they were um and you know you've got to remember the npc's sole remit is to get inflation to two percent um so it might think that another cut will um will be okay because inflation is on its way down to two percent and it can it can get away with that because also it doesn't want to undershoot two percent as unlikely as that feels to be honest based on you know how much your food shopping costs All right, then.

28:18Talking of mortgages, should you overpay yours? It's the dilemma of many a homeowner with some spare cash. But apparently, Helen, now is a good time to do it with a savvy trick. What's this about? Exactly. So the tables have kind of turned in recent weeks and months on savings rates and on mortgage rates. So for years since mid pandemic, savings rates were so generous, we got up to, you know, beyond 5 % rates that hadn't been seen for years. So if you had a bit of spare cash, you were better off putting that in a savings account, because you would earn more interest on the money in your savings account, than you would save yourself by putting the money, paying the money off your mortgage.

29:06That's now changing. So savings rates are falling below 4%. As Simon said, many people on legacy accounts will be on much less than that. But the best rates are falling around sort of below 4%. While mortgage rates are in some cases above that. For many people, actually, they'll be paying more than 4 % on their mortgage. So we've had that shift now where for a lot of people you're better off to pay more than your monthly mortgage payment to overpay your mortgage because that makes more financial sense to you than putting the money into a lower paid savings account. So to put some numbers on it the average two-year fixed mortgage is 4.85 percent the average five-year is 4.94 percent people can get cheaper deals than those especially if you've got big deposits or a lot of equity but they're the best rates.

29:58Average savings rates, the average fixed rate is 3.81 % and the average easy access is 2.42%. So that can be quite a big difference. And with overpaying your mortgage, because the interest kind of racks up so quickly, it can actually save you quite a lot of money over the whole life of your mortgage, even if you just overpay by regular small amounts. So we've run some figures in our piece. If you overpaid£200 a month on a mortgage of£243 ,900, you would save in interest £42 ,000 and you would pay your mortgage off five years and two months earlier. So, you know, Like 200 pounds a month, it's quite a lot of money.

30:46But if you were going to put that into your savings account and you put it into your mortgage instead, I mean, that's a huge saving. And, you know, being mortgage free five years earlier is not insignificant at all. And there are a few caveats. So obviously money that you put into a savings account, you can get it back. Whereas money that you pay off your mortgage is much more difficult to get back. So do make sure that if you're going to do this, you only do it with money that you're happy to say goodbye to forever. And also there's restrictions on how much you can overpay. So if you're on a fixed rate, most lenders will say you can overpay 10 % of the mortgage balance a year without being charged.

31:32But if you go over that, you might be subject to an early repayment charge, which can be quite hefty. So there are some caveats, but it's something that's worth thinking about, especially, you know, if you're maybe getting closer to paying off your mortgage, can you sort of speed up the process? If you've taken a big and expensive mortgage or a really long mortgage, is this a way that you can maybe cut it down and reduce your burden? So, you know, if you've been thinking about cutting down the mortgage, now is quite a good time to maybe do it. So one of the questions, Simon, I'm hearing a lot, I wouldn't say a lot, but a lot more at the moment, which is if I have some spare cash, do I put it pension, ISA, investing, or do I put it overpaying my mortgage?

32:16I mean, what are your thinking? What are your thoughts around that question, particularly now in this current environment? look the difficulty is is do you take the guaranteed return or do you take the potential theoretical higher return and the great thing about overpaying your mortgage is you know exactly what benefit it is giving you um you've got your interest rate on your mortgage uh and then you can work out how much sooner it's going to clear it with a calculator and basically the return is what's the interest rate on mortgage now can you beat that now theoretically if you've got a mortgage on four percent rate or four and a half percent rate you should probably be able to beat that by investing in stock market you can match it pretty much with a savings account you do have to remember the tax though because the great thing about overpaying your mortgage is it is also tax efficient you're not taxed on the benefit of that if you have your money in a tax savings account you're going to be losing 20 40 45 and soon be losing more actually because the interest on savings is going to go up so if you are putting in a savings account make sure it's going into a cash isa where you're not going to be suffering that tax blow same goes with investing you can invest the money but if you invest the money in a standard account and you build up a big pot you're going to get hit with a hefty capital gains tax bill when it comes time to cash it in so if you could do it in an isa and then the gains build up tax free alternative is you could do it a pension.

33:49And the great thing about pension is you're going to get a 25 % automatic uplift on the money that you put in from the basic rate tax relief. And then if you're a higher rate taxpayer, you can claim some more of the tax back as well. Issue is though, you're going to get taxed on that money when you take it out of the pension. So what are you going to use the money for? Now, if you think you're going to use the money to pay off your mortgage, for example, then you need to consider that bit and maybe the ISA is the better option if you're just going to use it to build up a pot and you don't need that pot until you're at least 57 which is what the age for taking money out of a pension is going to be in the future then okay fine and that you know they could change the rules so you've got to think about these things and but broadly speaking you should be able to beat the rate on the mortgage by investing but that's not guaranteed markets can go down as well as up and to give an example if you've got an interest-only mortgage part of our mortgage is interest only you can invest to try and pay that off and that was the thinking behind us having part of that mortgage is interest only the problem is though but you might then spend the money before you pay the mortgage off so if you dip into that pot and use the money for something else you have to start again at zero and then you've got less time to do it and to go back to the pension point you know i've got some money in a sip and i was like well actually you know what i never really had accounted to go oh that actually that could go towards the mortgage balance but that sip money obviously i won't be able to get it from 57 but i'm going to get taxed when i take most of that out i can get the first 25 tax free but the rest of it is going to be taxed so you can't just equate the number in the sip with the number on the mortgage because they don't match some interesting stuff there food for thought helen just a quick one you mentioned there about getting um penalized for overpaying there is a story on your website how I paid off my£330 ,000 mortgage in just four years, it saved me£70 ,000 in interest and let me quit my job.

36:03How on earth did this person do that? So if anyone happened to be watching Dragon's Den last night, you might recognise this person because it's a man called Janesh Vora and he was on there yesterday hoping for investment for his business, Sprive, which is an app that helps you repay your mortgage. So he's talked to us and told us the story of how how he did this himself, which inspired him to start this business. So he bought his first home in 2012 with his wife. It's in Watford. It cost£440 ,000. He agreed to take it on a 25-year term, but he ended up paying it in just four years, which is quite astonishing.

36:46We should say, first of all, he did have a well-paid job. He worked for Goldman Sachs. So he was relatively wealthy however four years is a very short time in which to pay off a 440 000 pound mortgage um and so he's told us a bit about how how he did it basically uh really kind of scrimped and saved so he said no takeaways no holidays we didn't do anything else with our money other than pay for essentials and overpay the mortgage they also stopped paying to their pensions and things like that they weren't kind of all in. Yeah, so it's, it's quite an extreme approach to it. But you know, mortgage free in in four years is, is quite astonishing.

37:32But as you say, the overpayments could have been an issue for them. So they were initially on a two year fix, where obviously, they could only repay 10 % without getting hit by these penalties. So what they did was in those first two years they saved off as much as they could and then when the first two year term was up they were mortgaged to a variable mortgage which meant they paid a higher rate but they could pay off as much as they wanted so unlimited overpayments so it's really it's really interesting really interesting read he's also explained about his app which can help people who earn less money to pay off their mortgages quicker as well.

38:14So the app's called Sprive and it's essentially quite like a kind of cashback voucher scheme for people who want to pay off their mortgage. So the way that it works is, and you know, some of the cashback sites work like this as well. If you've got a purchase to make, you know, you're going to the supermarket or you've got some furniture to buy from Ikea, instead of paying cash, you go onto this app and you buy yourself a voucher for that shop to make your purchase with. And when you do that, Spry gives you a cash reward, which instead of coming to you is paid off your mortgage balance. So it's essentially a way to, you know, almost without realizing to chip little bits off your mortgage over time, you know, sort of making purchases that you would have been making anyway.

39:01And I think that's kind of the point you know with paying off your mortgage even really small amounts can make a really big difference and so I've kind of looked into this myself um having taken on quite a large mortgage recently and you know we can't afford to pay off a lot of extra every month at the moment but I looked at it based on you know just even just 50 pounds a month and actually it can be quite surprising um how much of a difference even that much could make um so we've got a calculator on the website, which can show you how much you could potentially cut your term and save by overpaying.

39:37So it's definitely worth having a look at. All right, then. Right, moving on. Simon, what on earth is going on with Bitcoin? It fell this week to its lowest level in 15 months. That's despite big professional and personal, I think, support from US President Donald Trump when it comes to crypto. He's a big fan. But the drop followed months of surging prices, which hit an all-time high of over$122 ,000 in October. Now, it's around$66 ,000. My goodness me, when they say it's volatile, Simon. Simon, what is going on? Well, nobody's quite sure what's going on to be honest um because bitcoin has fallen a lot and um whilst it has a tendency to fall a lot it's kind of a moment when it shouldn't really have fallen by that much but what's potentially going on here is a number of things all coming together firstly we're seeing a bit of a shift away from investors from the kind of highly speculative assets or shares that the bitcoin represents in a way bitcoin is obviously not share it's an asset but it is very speculative and it's kind of has moves akin to the way that some of the high octane u.s tech stocks move the nasdaq moves and so on and it can magnify those moves as well and whilst those have seen huge gains from investors in recent years there's a bit more interest from investors in other places so for example the reason why the footsie 100 is doing so well is because there's a bit of a shift of money from you know big u.s tech and high octane over towards the the footsie 100 and the footsie 100 was you know returned 26 last year so investors are going oh hang on a minute maybe i'll have a bit of that then you've got gold and silver so a lot of the speculative money has gone into gold and silver recently gold and silver have absolutely rocketed silver in particular is in silver's in sort of almost like meme stock phase at the moment and if you take some of that hot money out of bitcoin and put it into gold and silver then it takes a bit of the demand away from bitcoin but then also you've got some people who've got the hot money in bitcoin and gold and silver and there's a suggestion that some of the people getting absolutely tonked by gold and silver suddenly coming off the boil are having to sell down some of their bitcoin in order to cover uh you know losses elsewhere or now the flip side with bitcoin absolutely tumbling they haven't to take a bit of money out there's also the suggestion that there's quite a lot of long-term bitcoin holders who've been doing some selling um in order to basically take a bit of profits fearing that we might be about to enter what is known as another crypto winter which is where crypto takes a tumble and then stays down on the floor for quite some time before eventually coming back up again i think you know what you have to look at is it's down nearly 25 this year um it just illustrates the extreme volatility of it and why if you do have money in crypto you need to make sure that you don't have too much money in crypto and it should only ever be a small part of your overall investment portfolio.

43:03You know my views about crypto, Simon. I'll say no more. Right. Jet setters in the British Airways loyalty scheme don't have long to turbocharge their Avios points by up to 500 % as its flash promotion comes to an end next week. Now, Avios is running a points deal through its Balance Boost programme, which allows holidaymakers to boost the number of points they collected between January 1st, 2025 and February 9th. So how does it work and is it worth it? Right, Helen, I didn't know anything about this. And I am a Avios collector, as we know, and recently an Avios spender, as Simon knows. Now, I've done this.

43:41I've looked into it. Apparently, I can boost one million Avios points. Is that two women? It would cost me£16 ,000. That's a lot of money, Helen. I'll be totally honest with you. I'm not entirely convinced. This is great. A million Avios for£16 ,000. Shall I do it, Helen? Well, look, I'm going to be completely open. I am not an Avios collector at all. Many people are including I know Simon Lumbert but basically to to explain it sort of briefly this is part of this balance boost program that Avios launched a couple of years ago collectors can basically buy more points so you can buy points in cash rather than getting them through sort of spending on credit cards or through booking British Airways flights so you can buy a lump sum of Avios points worth 100%, 200 % or 300 % of the AVIOS points you've earned in the last 30 days through flying, shopping or however you collect them.

44:47So the offer that they got out at the moment, it's limited. So it finishes on Monday. It basically makes that system even more generous. So it allows you to boost the points you've collected in the past year. So since the 1st of January 2025 and not just the last 30 days. So you have to pay to do it between 92p and 96p per avios for the first 300 ,000 avios. As you said, very much worth looking into what that is worse to you with the points that you have. It seems incredibly complicated to get your head around as an avios outsider. But if you are a collector, it seems like, yeah, head to the article on our website um do the numbers and uh yeah worth looking into all right simon help me out here so i don't have to take all of the avios points i've collected i'm just baffled at how many how i've got so many but anyway um so i can do a little bit less if i do 437 000 avios it's a mere snip at 5 000 pounds now i joke with that but how have you managed to get that many avios that you can boost?

45:56How many times have I travelled recently, honestly? No, but don't you have to spend the money on your card to get that amount of Avios that you can boost? Do you know how many times I spend on my credit card? No, also, I think a lot of this is business travel. So there's a few instances where I have travelled business around the world that a company is paid for and I get to collect the points. I think that's why I've got so I don't know how I've got so many. It's really look at my spending and take a long hard look at my life and life choices. But yeah, there's a Los Angeles one here that I'm pretty convinced I didn't book.

46:32That was 41 ,000 Avios points I got. But anyway, so point being is actually for someone who travels a lot like me, spending 5 ,000 pounds on how many, half a million Avios points might not be so terrible. or am I just cracking up? If you are the kind of person who is likely to use your avios and make the most of them, then it might be a good deal. I'm not sure I could ever bring myself to spend that amount of money on avios points. To give an example from my more modest avios account. Yeah. right so i've got the opportunity to boost all the avios points that i've collected since the start of january last year yeah so that's me spending that's the spending on my amex card which isn't actually that much because midway ish through last year i took out a different credit card which is 0 purchase credit card so that i can just buy stuff on it and then pay it back over time without incurring any interest which is just a much better way of me working a credit card um and if you want to listen about to the insanity of my attempt to make the most of avios and actually generate a false economy by ending up occasionally paying interest that has eased up any value that i'll ever get from the avios you can just listen to various podcasts that we've recorded in the past but since last year i have collected the grand total of 3549 avios and that's across four transactions listed in my account.

48:09How many? Four transactions. I've collected 3 ,549 Avios in a year. Now I can see why you're so surprised at mine. Yeah. So last January, I got 1 ,585 for an Amex spend. Last February, I got 473 for an Amex spend. In March, I got 1 ,128 for an Amex spend. and then I didn't do any spending so I got that new credit card instead and then in January this year well literally last week I got 363 because I went to Munich on a plane now that gives me 3549 now my maximum boost that I could get is a 500 boost which would take me to 17 ,745 five avios from those transactions and that would cost me 163 pounds so there's the question is it worth me is it worth 163 pounds now initially i was like oh that's quite good maybe we should do that 163 pounds 17 000 avios take my total balance to 32 769 so that sounds quite good and i was like is it though really like or am i just about to spank 163 pounds on some more avios that i'm never going to use because i've only ever actually after all these years of collecting them used some recently i had never used any until i booked a flight to munich for my wife with the mavios at the tail end of last year um so my 33 000 which i have looked it up and if i was really lucky i might be able to get a return flight to new york but i probably have to fly at a time that i didn't want to fly or i could get a return flight maybe to some european destination uh at a time that i would want to fly that would be my 33 000 but then i'd be limited so like i could only do it with the b.a flight and if it was b.a flight i could pay for via avios and i wouldn't be able to just choose any airline from any airport and at the end of the day i've looked at this and gone you just chuck in 163 pounds at something you're never going to use but if i was the person who did travel all the time like you then i'd probably look at that and go that might be 163 pounds well spent just to be clear simon i've not got a million over that time i've got a quarter of a million i mean that's still a lot isn't it so obviously if i 500 it will take me to one and a quarter million yeah but for 16 000 million 16 000 pounds i mean can you imagine sorry when i said to you that uh combination of isa pension pay down your mortgage buy avios points no uh who doesn't want to be an avios millionaire i'm not bothered i'll be honest with you simon i'm not bothered i've got plenty thank you simon right crane is back on the case helen selfridges this is a bad one.

51:06Let me just read this reader email that you had to deal with. So I received a Selfridges voucher for Christmas. Very nice. Ordered an All Saints jacket for£263 on its website and collected it from the London store. Sadly, as happened, it didn't suit me. So I returned it within the one month window by posting it back. I then received an email saying my return had been rejected. Why, you might ask. Due to damaged buttons and, quote, having hair all over it. or hair all over. I only tried the coat on once at home and I'm certain I didn't damage it. I obviously can't rule out a stray hair finding its way onto the coat, but the accusation that it had hair all over is totally false.

51:49I treated the coat no differently than if I'd have tried it on in the shop. Selfridges won't provide photos of the coat to prove it and just repeatedly refers me back to the terms and conditions. Helen, as someone like my good self, who does shed a fair bit of hair. I'm surprised I've ever been able to return anything. I know it's this is a really funny story. I mean a stray hair one straight I mean no hair all over apparently but I mean that this is this is one woman how much hair can she get on a coat that she's tried on I just think this is very hard to prove because if you are someone who's monitored that jacket who's to say that hair's not come from you and this is where she wanted evidence and they didn't give it to her.

52:29Yeah. And how many hairs is too many? Is one hair okay? At what point do you cross the too many hairs threshold on your return jacket? I think, and actually, funny enough, this is the second time that someone has got in touch with me in the last couple of weeks saying that they've had a return refused because of hair. So it seems to be a more common excuse that retailers are using. On a serious point, I think obviously there is a huge problem. As someone who shops online absolutely loads, retailers are really cracking down because, to be honest, there are tons of people who will either just order bundles and bundles of stuff, knowing full well that they're not going to keep most of it and send it back, which, of course, retails money, is really bad for the environment and is just a bit of a silly way to go about things.

53:18um the other problem is that people will order stuff wear it out or even just put it on and take pictures for their instagram keep it for a while um and then send it back saying that it hasn't been used um you know i you see girls on a saturday night out with the tag hanging out the back of their dress and you're like i know i know your game um so you know there is a fair point that retailers are really cracking down on this fairly it's called wardrobing by the way if you order something with the intention of sending it back later for a refund after wearing it but in this case obviously this is not what this person had done she just tried on a coat and then sent it back and she's been essentially unfairly accused of having worn it she asked for evidence as you said she was like well show me show me a picture of the coat that's covered in hair then and Selfridges just didn't reply to her, which I think, you know, someone obviously realised that they'd been a bit overzealous.

54:15I think it's really important, actually, sadly, now when you send things back, do snaps and pictures of it yourself so you can say, no, I sent this back in decent condition. And you know what, actually, that's if it even gets back because half the time it seems to be getting stolen by the courier at the minute. So it is online shopping has become a whole kind of war zone. And so I got in touch with Selfridges in this case and said, look, you haven't given her any evidence that this coat was covered in hair. You can't prove it. She insists she hasn't done it. And they did turn around the decision and say, we will refund her.

54:52But it just shows it is, yeah, bad times for people who like to buy clothes online. Yeah. I mean, look, I've got, like you said, I've got sympathy for the retailers with, what do you call it? Wardrobing? Wardrobing, yeah. I quite like it. It makes it sound quite classy. Do you think? Oh, I don't think it does at all. Yeah, so I've got a huge amount of sympathy and, you know, but come on. At least if you're not going to provide evidence, I'd have gone to town. You know, you'd ripped it. It was awful. Rather than a stray hair. It just seems a bit ludicrous. But anyway, right. We have a podcast listener question of the week for you, Simon.

55:29If you are ready. So this is from lovely Rick. How flexible are flexible ISAs? The answer is written nowhere. You put in£10 ,000 into a stocks and shares ISA, call this ISA A, in the current tax year so far. In a separate cash flexible ISA, ISA B, you put in£6 ,000 over the course of the current tax year but have now emptied it to zero for a big bill. How much can you put still in your stocks and shares ISA this tax year. Note you have no other ISAs. The way a flexible cash ISA works is that you can take money out and then you can put it back in in the same tax year without it counting as part of that year's allowance.

56:12So you can put up to the same amount back in. So in this instance, you put£10 ,000 in ISA A, your stocks and shares ISA. So you've used£10 ,000 of your annual allowance there you've put six thousand pounds in isa b your cash isa so you've used six thousand pounds of this year's isa allowance there so you've used sixteen thousand pounds of this year's cash isa allowance in total you've taken all of that six out of the flexible cash isa and you can put all of that six back in to the flexible cash isa and that's not going to use up any more of this year's isa allowance as long as you put it back into the same isa before the end of the tax year that means that you still have your four thousand pounds of this year's allowance that you can use and you could put that either in your stocks and shares isa but you could add it to the cash isa as well so if you put six thousand pounds into your isa a you would be at 22 000 and therefore it wouldn't be allowed so you can only put the six thousand back that's 16 that gives you four grand extra to play with to put either into a or b is that right you have to put the money back into the same flexible isa boom simon's stat of the week i didn't think you were gonna ask me a stat for you i know but i should why not you're on a roll simon you're on a roll um okay oh here you go right 73 800 pounds the amount that abios is charging me to no that is the average income tax paid by a resident of kensington and chelsea according to some figures that we have published today 73 000 average income tax bill that compares to the UK average, which is£7 ,000.

58:07And just goes to show how a bunch of extremely high earners can massively skew an average. All right, that is it. Simon, thank you, Helen. Thank you, thank you for listening. You can keep up to date with all the latest breaking money news. Just go to thisismoney.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? You can email us at podcast at thisismoney.co.uk or come to thisismoney.co.uk forward slash podcast to find all podcasts past and join in the debate and read the comments. And if you like our podcast, why not rate us wherever you found us?

58:41Perhaps other people find us too.