Will the Renters' Rights Act work or backfire?

0:02Welcome to This Is Money Podcast, sponsored by Trading212. Download the Trading212. app and open a cash ISA with promo code TIM to get the 12-month bonus promo rate at 4.51%. Terms apply. I'm Georgie Frost and joining me and Simon Lambert today is Helen Crane. And coming up, the biggest shake-up to renting in decades. The Renters' Rights Act comes into force this week. Much-needed security for tenants, but is it the final nail in the coffin for landlords? Also today, interest rates have been held, for now, but brace yourself for Trumpflation warns the Bank of England. So what should we be doing to prepare?

0:41Plus we explore the huge rise in additional rate taxpayers. And you can't even blame Rachel Reeves for that one. And forget the Costa del Sol. Have you considered Dortmund for your summer holiday? No, nor I. Don't forget you stay up to date with all the latest breaking money news just to go to thisismoney.co.uk or download the app. The first after six years and four prime ministers, the Renters' Rights Act has finally come into force, bringing with it some of the biggest changes to renting in decades. Originally introduced by the Conservatives, the new laws aim to give greater security and protections to tenants from evictions and unfair rent increases, among other things.

1:21But some say it is the final nail in the coffin for the beleaguered sector with landlords selling up in droves. So will this all backfire? Yeah. Welcome, Helen. Welcome, Simon. Simon, firstly, a bit of history on this one. What's the Renters' Rights Act? Where has it come from? I feel like we've been talking about it for a long time. In fact, I've been talking about it for a very long time because I think I've bought a house and rented two other homes since this has been discussed with me by estate agents. It's been a long time coming and it's been in various forms over successive governments.

2:02The idea that tenants need more rights to help shift the balance of power more into their favour and away from landlords. Renting can be a great experience for people. You get wonderful landlords. You get great letting agents. You get great tenants. but you can also get bad landlords, bad letting agents and bad tenants. And I think that it takes two to tango, you have to remember on this and I can see this from both perspectives but I'll talk about that in a bit when we go on to the what do we think about this thing but firstly, what's in it? Basically, it's become law today, May the 1st and it is the biggest upgrade to renters' rights in a generation.

2:52now the big thing here is firstly it is the end of what's known as assured short hold tenancies so fixed term tenancies the 12-month tenancies that people commonly sign up to it used to be that you signed up to a six month or a 12 month because more often now you sign up to a 12 month or an 18 month or a 24 month even and from this point on that won't happen instead there will be periodic or rolling tenancies that tenants are signed up to and they will be able to leave with two months notice so they can give their landlord two months notice they don't have to wait a year and then give notice or leave at the end of that fixed term they can give notice immediately if they want to although why you would move into a flat and give notice immediately I don't know on the flip side however it's going to be a lot harder for landlords to get their tenants to move out.

3:48Landlords need to give four months notice, but they can also only evict their tenants if they give one of a number of acceptable reasons, such as they're going to sell the property, they want to move into it, they have a family member who wants to move into it. And there are some exceptions for if the tenant is in breach of the agreement, antisocial behaviour, in arrears, and so on. Although tenants will be able to run up more arrears before landlords can try to do something about it. There's this end of section 21, no fault evictions, these so-called no fault evictions. This is basically the legal process that enabled landlords to get rid of their tenants.

4:28As I said, that stopped. There's also rent increases. They're going to be limited to once a year. Now, this was something that pretty much happened anyway, because you came to the end of your fixed term contract, and then you were offered the chance to renew. And maybe that was when the landlord put up the rent. But they're only going to be able to be done once a year and tenants will get more rights to challenge them if they are seen to be excessive compared to market value increases. Right. And also what's important here is the extra level of protection that tenants have in that landlords now won't be able to just easily chuck them out because they're challenging the rent increase.

5:12There also won't be any more bidding wars. So basically, the asking rent is the price and you won't find a situation where in hot demand areas, you've got the letting agent getting bids from different tenants to try and get in there. It's going to be much harder for landlords to say that they don't want people to have pets, for example. It's not going to be a complete you must allow people to have pets, but they're going to have to give a very good reason. And they're not allowed to discriminate against people on housing benefit or people with children and so on. So there's a big upgrade to renters' rights.

5:43The flip side is that this is effectively another crackdown, more red tape on landlords. And we've already seen a scenario where potentially, you know, some people have been moved out of their properties before this kicked in. And also the other really important thing to remember is this kicks in today, but it doesn't just kick in for new tenancies, OK, from today. It kicks in for all existing tenancies. So every renter now has these rights, whether they signed up to their tenancy from today or whether they signed up to it a week ago or a year ago. And that's the thing, Helen. I believe I was essentially thrown out of my property how many moons ago over the fears that they wouldn't be able to increase the rent by that much.

6:31And they tried and then no one rented it. So they had to backtrack and lost months of rental income from me. So I wasn't too bothered about that. But what do you think in sum all of these measures added together because the the thing that I hear from landlords is oh but what if I have a bad tenant it'll be really difficult to get them out etc but if you are a really bad tenant you're damaging the property etc that hasn't changed has it and the reality there is it's actually very difficult anyway for landlords to get people out that the courts are all clogged up all this sort of thing so will this materially do you think change that much to the system?

7:10I think you're right in that it was difficult to get rid of your tenants anyway. And there are all these exceptions, as Simon said, for, you know, so this rule about landlords needing to give tenants four months notice to move out, that doesn't apply if the tenant hasn't paid their rent for a long time or has damaged the property or has caused antisocial behaviour, then it's only two months, which is the same as it is now. So I think landlords' argument that it will be harder to get difficult tenants out doesn't necessarily wash, but it will be more difficult to get tenants who are good tenants out, which I think is right, to be honest.

7:50I think the main thing that this legislation brings for tenants is security. So it's going to be harder for your landlord to make you leave your house just because they want you to or they want to put the rent up, which I think is fair, to be honest. You know, we've seen such huge rent rises over the last few years. Tenants are paying a lot. It's pretty much at this point the same as paying a mortgage in most areas. And I do think, you know, you do deserve, if you're a good tenant, you pay your rent, you look after the property. I think you do deserve a level of security in your home. You know, that's one of the sort of bases of a good life, really.

8:30I think, you know, knowing that you're not going to be kicked out for no reason, knowing that, you know, your landlord can't just wildly put the rent up whenever they want. I mean, it wasn't quite whenever they want before, but there's stricter kind of rules on what they can do. And to be honest, I think it's right. I can see landlords point of view, you know, this is their property, they own it. And I guess they feel like they now have less control over a property that they own which which is a valid point but you know if you are a landlord you know renting out property is is your business you do have to rent the home to someone and they do have to actually be allowed to live in it and live their life so I don't know maybe I'm a bit biased I've I rented for many years before I bought my flat I've lived in I think 10 rented flats in 16 years um so I've kind of been through the ringer with it a bit.

9:24And, you know, I have had really good landlords, a couple of landlords that have been totally reasonable, treated it really well, nice property, but I have had some absolute shockers of landlords. So I'm sure they would say the same, they've had terrible tenants. But on the whole, I think it's a good thing, other than, which is something we might come on to later, the fact that it might cause a lot of landlords to stop wanting to be landlords, which will have knock-on effects for tenants. I see that argument that it is their property. But in my trying to oversimplify this brain, I am a broadcaster.

10:02I can't say what I want. There are responsibilities that you have. That property is more than just a possession. It is someone else's home. And I think too many, particularly letting agents, and I've moaned about this before, Simon, as you know, I've had some phenomenal landlords and I like that personal touch. The letting agents, I think, don't care. But the reality with that is anyone can be a letting agent. There's really not a lot of regulation there. So while this act is quite good in certain regards, I do think there's big swathes of the sector that does need to be looked at. One of the arguments that people will say is, well, you know what, if landlords are leaving the market, and I want you to tell me, are they really leaving the market?

10:46But we've been reading the papers and it says that there's a big exodus if they are doesn't that mean a great thing for first-time buyers because presumably they're selling up well firstly to tackle your first point on the the letting agents and this being someone's home i think that's actually a very good point and it's very something that you picked up on there that that's quite important and i would expect you to because obviously you've spent quite a long time renting properties now i can see this from both sides right i have spent 20 years writing about property, writing about buy to let, writing about tenants.

11:24Right. So writing about landlords, write about tenants, write about property. But more to the point, my mum is a letting agent. She runs her own letting agency. It's a one woman band and she has been running it for, I don't know, 40 years, maybe now. Maybe not quite that long. Nearly 40 years. Right. Right. Now, it's true. You know, there aren't that many requirements to become a letting agent. There are more than there used to be. Right. But my mum doesn't have any professional qualifications as a letting agent. I mean, she's worked in the property. She works as letting agent before I was born, you know, for estate agents in London and stuff like that.

12:04And then she set up on her own after she had kids. But, you know, she's a better letting agent than somebody who's managed to do. a six or 12 month course and got themselves a certificate right because the key thing is that my mum is one of those letting agents who makes sure that the landlord looks after their tenants and also looks after the tenants herself because as a landlord the thing that you want most of all is your property to be rented out and rented out consistently consistently the thing that costs you money is void periods when your property isn't rented out and bad tenants who cause you problems and make a mess of the property.

12:50And I know that, you know, whilst tenants are often painted as the blameless victims in this, it's not always quite so cut and dry. And in fact, there are many, many cases where tenants cause a level of damage to properties that the deposit comes nowhere near covering, right? So that's what you want to avoid as a landlord. That kind of damage or that kind a problem or people not paying their rent and that does happen more often than you think and also void periods and the way that you do that is by looking after tenants and then you keep your tenants for a long time and actually this is where the renters rights act is a good idea because realistically you know as a landlord you don't want to be having to renew the tenancy agreement every 12 months when we talk about mortgages and i talk about why taking a five fix is a good idea.

13:38I always say it's because two years comes around incredibly quickly. Well, if you think two years comes around quickly, just you wait till you find out how quickly one year comes around, you know. And that works both for landlords and for tenants. It's a nightmare, as Helen said. Like, you know, all of a sudden you feel like you've only just moved in and then, oh my God, 12 months is up and now they want to put up the rent or actually they're saying they want to let it out to someone else because they reckon they can get more money from renting out to someone else and so on. But it's the same for the landlord you know they're like oh jesus it's another round and then the letting agent charges them a fee and so on and so on and so what you want actually is a situation of stability from the landlord's point of view so i don't think it's necessarily a bad thing i think it's a bad thing if you suddenly get loads of tenants saying right two months notice we're out right two months notice we're out but we've got tenants saying that they're what they what they want most of all is security.

14:32So why would tenants do that? So maybe this thing will work out okay. I can see where it is an issue though for the landlords who just feel like they're being crushed by regulation, red tape and extra costs. Landlords are selling up. It's not the Renters' Rights Act that's causing them to sell up, although some of them will have gone, do you know what, I've had enough. This is the final straw. What's causing them to sell up is the tax squeeze that they they've faced, in particular, the fact that they can't offset all of their mortgage interest against their tax now, which means effectively that they're paying tax based on their revenue, not on their profit, because that mortgage interest is a business expense.

15:16You can't claim back your mortgage repayments, paying off the debt, but you can claim back the interest. So effectively, they're paying tax on the interest that they're paying, which is quite controversial. And then also there's things like the rules about having to upgrade the property for better EPCs, energy performance certificates that are going to come in, that's going to cost them a load of money, and various other things. And also just an age profile thing. Many landlords are older, a lot of them have made quite a lot of money off house price rises, and they think, you know what, I might as well cash in and sell up.

15:46The other thing I think that's really important to remember about this conversation is I think the conversation about renting is dominated by a very London-centric view. you know the people who work in the media i.e us so the people who are writing about this and talking about this and publishing stories about it horror stories and everything and comment pieces and all those kinds of things the mps the campaign element of this it is all very london centric and the london rental market is quite different to the rental market in a lot of other places around the country now i'm not saying that the rental market in manchester isn't probably red hot or potentially the one in bristol and so on but if you go to most towns and cities around the uk it's a it's a very different scenario and landlords are a lot more concerned about those void periods i was talking about so don't try and pull the fast ones that they do but to go back to your original point often it's not the landlord trying to pull a fast one it's the letting agents And the letting agents that are a problem are not the one man bands like my mum who give both the landlords and the tenants a boot up the backside when they need it and also give them some TLC when they need it.

17:00It's the biggest state agency firms, right? Either the national firms or the big regional firms who just see it as a way of milking more money out of people. And we saw this with the fees that ended up getting banned. You know, a fee here, a fee there, a fee for this, a fee for that. and essentially what they're doing is basically just extracting as much money as they can from landlords and tenants and quite often delivering a really crap service because it's the office junior who gets put into that position you know everybody else goes and works on selling houses like chuck the office junior in there charge them some fees and that's where you get the issue of tenants saying okay well we'll take the property but we would like it to be redecorated We take the property, but we'd like a new carpet in this room or something like that.

17:46And then it just never happens. And then they go back to the letting agent and say, you said this was going to happen. The letting agent goes, oh, yeah, sorry, my landlord says I'm not going to do it now. Half the time, I don't think the landlord even knew. For want of a better word, they just bullshit people. And I think that is often one of the problems. Because actually, in a scenario where it's like, if you're a tenant and you want a tip-top property and you go look at somewhere and you're like, well, it needs redecorating. It needs a carpet. It would be quite nice if the kitchen was done up a bit, quite nice if the bathroom's done up a bit.

18:18Well, you can't expect to rent that property for the price that's on the market if you want all those upgrades. But you could say, I'll pay you more if you do all those upgrades. But I think at the moment, tenants are like, well, why would I say that? Because I'll only say that and then they won't even do any of the work. Now, I have rented quite literally all over the country, from Newcastle, Worcester, Manchester, Humbridge Wells, Surrey, London. And it doesn't really matter so much about the where. It's the time of the market as to how bad it was. And the worst was when I rented in Guildford and it was such a hot market.

18:54And literally, before I'd even looked around, that place was gone. So as soon as I walked into the door of this other place, I looked at, I'll pay you deposit now. but Helen I'm just curious as to whether this will all work and going back to that argument about landlords selling up and people saying oh well that means more houses for first-time buyers firstly firstly you know my views about renting and this obsession we have of buying and you're seeing couples who are really young haven't been together very long saying this is the only way I can buy a house to which there's red flags going off everywhere if you feel you have to buy a property in your early 20s.

19:34No, you don't. Enjoy working and moving around the country. However, I don't even think that will necessarily happen. Are we not just going to see a load of, I'd probably think like private equity or something coming in, buying up professional, professionalise, but then you get an even further distance away from the tenant. Do you know what I mean? The problem, I think, is that, you know, the further away you get from the tenant, from landlords to letting agents to big property companies, the less they actually care about the individuals. Yeah, I think you're right. And a lot of landlords, and it is a lot of landlords that say they're going to sell up because of this.

20:13So also the auction house did a survey last week, and 42 % of the landlords that they asked said they were unlikely or very unlikely to keep on letting their property as a result of the renters rights act as Simon said they might have been thinking about that anyway because of all the stuff that they've been subjected to over the last few years but 42 percent is is a big amount and you know yes um when I was a first-time buyer a couple of years ago I did look then a lot of properties that were being sold by landlords can be quite attractive to a first-time buyer because it's obviously a bit of a blank slate you can kind of decorate it how you want they're normally you know kind of quite basic but you'd expect you maybe get a bit of a better price and then you kind of do some stuff um to it so it yeah it can be a good opportunity first-time buyers but then you know there is always a a finite pool of first-time buyers who have actually managed to get over this sort of deposit hurdle and afford to actually buy a flat so i think if we're saying you know if 40 if 40 percent of landlords do really sell up i I think it's a bit much to believe that all of those flats will be moved into by first-time buyers.

21:22So, yeah, I mean, a lot of people talk about the sort of rental market becoming more professional. So I think a lot of these landlords who will drop out will be landlords who've just got a handful of properties, accidental landlords, you know, people who've maybe bought a property on their own, then moved in with a partner and decided to keep the property that they had before and rent it out. And I think for those kind of people who don't, they don't have the scale to take these hits of, you know, a tenant asked to move out after they've only lived there a few months. Or, you know, if you're a landlord that's got 15, 20 properties, you've got enough kind of cash flow coming in that you can absorb those little hits.

21:59But if you've just got one or two, then one hit like that could wipe out your profit for, I don't know, months, a year. And I think that's a shame because some of the best landlords that I've had have been those individuals who just have one or two properties and you actually have a relationship with them. Maybe they don't have that letting agent who comes in and probably annoys you and also annoys the landlord a bit. It might be that these professional landlords, I've rented from a few of them in London, you know, they buy up tons and tons of usually ex-council flats, rent them all out through a letting agent.

22:33it's quite impersonal maybe we'll see more of that I mean in a way that's good for tenants because I know when I've lived in those kind of properties they tend to have a handyman who works all the time so something breaks they just send him around stuff gets fixed quite easily but also it's quite impersonal and it's difficult to you know if you have a circumstance you're asking for a bit of flexibility on I don't know moving out or something you're not really speaking to your actual landlord you're going in between some letting agent and it's a bit computer says no so there's kind of pros and cons to both uh types of landlord i guess you just hope that the it's the good landlords that stay and and the bad ones that decide to leave but obviously it's not going to be that simple all right survey says good thing bad thing jury's out i think on balance a good thing one thing we haven't quite mentioned yet is that if a lot of landlords leave the market it's likely that rents will go up for tenants because fewer properties more competition as you were saying when you rented in a really hot market if there's more people looking at a flat landlords feel they can obviously bidding wars will be banned but they'll kind of feel they can put it on at a higher price because they have more people looking and it's more likely they'll find someone who'll who'll pay that price also we're already hearing about landlords who've put rents up just before this act came in to kind of shield themselves from any costs that they end up having to foot because of it.

23:57So I think great for security. I think it's brought tenants some rights that they badly need, but also more flexibility when they need it. I think not being locked into a fixed term tenancy, if you don't want to be, can be a good thing if your sort of circumstances change. But I think the thing that I'm worried about is that it will end up in the long term costing tenants more in the form of higher rents. Simon, survey says... The jury is out. I can see, as I said, I can see both sides of this. I can see how it would be a good thing. I can see why there is an argument for shifting the balance more in tenants' favour.

24:33I can also see a scenario where I don't think people have really listened to what landlords and the sort of landlord organisations are saying. I think we might be making the same mistake. Like we make regularly where we completely ignore the people who know what they're talking about and say, you don't know what you're talking about. And then it turns out that perhaps we should have actually listened to them in some way. The other thing I will say to on Helen's point is, yeah, I can definitely see a scenario where rents go up by more over the long term due to this. This thing where the rent rises is going to be limited to, you know, not above excessive market value type things.

25:15Right. landlords are just going to look at how much rents are going up by on average and then or inflation or another figure that they can justify and then put rent up by that much because why wouldn't you and so over the long term there's quite a strong possibility that that's going to be higher than the average you would have otherwise seen and these things compound and once you stretch that out over five years or ten years then it does add up because we've seen this before where limits are imposed on things people go up to the limit thank you very much by the way simon and i sat down with property investor rob dicks for our new podcast investing unlocked to talk about whether there's still money to be made in being a landlord and investing in property and how to go about doing it that episode is coming out very soon be sure to cash it and all the other episodes by subscribing on youtube and investing unlocked uk or wherever you listen to podcast.

26:10We're also on social. Now, moving on. As if we haven't had enough of higher bills and the increasing cost of living, we are being told to brace ourselves for Trumpflation. As a result of the conflict in the Middle East, the Bank of England is warning food price inflation could hit 4.6 % by the autumn. Energy bills are likely to jump and stay high for the rest of the year. And average mortgage repayments might rise by£80 a month. But despite this, the NBC decided to hold rates this week. For how long? Yes, the Bank of England's Monetary Policy Committee voted by eight to one to leave interest rates on hold at 3.75%.

26:50There was a dissenting voice from Chief Economist Hugh Pill, who voted for an increase to 4%. That crazy guy. Seven of the eight remaining members signaled to a greater or lesser extent that rates may have to rise though, with some suggesting the bank may act forcefully. This is bad news for people who have mortgages. Logically, you would think that there would be no point in the Bank of England raising interest rates to deal with an inflation shock triggered by something that has already happened and involves the rising oil price and the Strait of Hormuz and Iran and Donald Trump, which are things that the Bank of England has literally no control over.

27:32However, what the Bank of England does in the Monetary Policy Committee when it's moving interest rates is it's trying to make sure that we hit our 2 % inflation target and it's looking forwards, not backwards. And it's trying to make sure that inflationary expectations don't get embedded into consumers' and businesses' minds and basically businesses start hiking their prices in expectation that inflation is going to be higher, thus feeding inflation. Consumers expect inflation to be higher. People demand bigger wage increases because they expect inflation to be higher and so on. So there is unfortunately the prospect of some tough love here.

28:10The one thing I would say, though, is that the Bank of England and interest rate policy in general, whatever central bank you're talking about, is effectively a gigantic confidence trick. what they're trying to do is convince you of something and what they'll try to do before they try to convince you of something by raising interest rates by a quarter point or whatever is try to convince you of something by threatening to raise interest rates or sort of hinting that they might raise interest rates because sometimes that is all you need to do the fact that there is the suggestion that rates might go up three times this year might mean that rates only need to go up one time this year or maybe not at all because if we think that rates are going to go up three times this year and if we worry about this and if we rein in our spending and businesses rein in their their borrowing and rein in their spending as well then it slows the economy down and has the desired effect ironically you would look at the economy and say the last thing it needs is slowing down however but the bank of england's job is not to manage the economy that is the government's job.

29:17The Bank of England's Monetary Policy Committee's job is to try to hit the 2 % inflation target. And just before I finish speaking, there is a new acronym for a trade. You know, we had the taco trade, Trump always chickens out. Well, we've now got the nacho trade or the nacho scenario, which is not a chance Hormuz opens. Helen, who cuts? Four rises? Hold. Three rises? Two rises? Who knows? I'm talking about all the speculation that we've heard just in the past couple of months alone as to what's going to happen. Now, I appreciate we were not expecting this sort of large Trump-esque action going on in the Middle East.

30:04However, what can we do amongst all of this noise to prepare for what may or may not happen? Mortgages, savings, energy bills, should we be fixing? What should we be doing? So I think it is looking like, at least if you believe sort of traders' expectations, is that there will be interest rate rises to come later this year. Possibly the next decision will be a rise, which is obviously bad news, as Simon said, for anyone with a mortgage. Although we have seen lenders cutting rates in the last couple of weeks. So as mortgage lenders tend to do, as soon as Iran kicked off, they put up their rates quite rapidly.

30:46They tend to kind of rush in and then they come down more slowly. But they are coming down gradually, still about a percent higher than they were at the start of March, but falling slightly. I think in terms of what to do, Simon was talking about this confidence trick of making people feel like they need to squirrel money away where they can and be sensible with their finances. And I think in a way that that confidence trick has worked. So something that I noticed this morning, they had the nationwide house price index out and prices have gone up by 3 % in the year to April, which is more than probably expected given everything that's gone on, even though that obviously only reflects the first month of the conflict.

31:31But one of the reasons that their chief economist said that house prices have been able to go up is because basically people have been really sensible with their finances. This is obviously wealthier people where they've been able to, but people's household debt is lower than it's been for years. People have quite a lot of money in savings, and that's kind of given them that confidence to still, you know, buy a property even if they have to take a slightly more expensive mortgage because after everything that's happened over the last years, they've kind of built this buffer. And I do think, again, you know, the cost of living has been really hard on a lot of people and there are people that aren't able to do that, of course.

32:10But I think if the last few years has talked kind of comfortably off people anything, it's having some kind of buffer if you can makes it feel like you can sort of smooth over a lot of these crazy ups and downs that we now seem to see all the time. So if you do need a mortgage though in the immediate term obviously speak to a broker is really good advice when things are changing so quickly they'll have a sort of direct line to the lenders they'll know what the best rate is and also what suits you best so do you need a two-year do you need a five-year should you pay a fee should you We even consider a tracker, which is something that some people are considering right now.

32:49So those are mortgages which are linked to the base rate, go up when it goes up and go down when it goes down. Obviously, it seems a risky move at the minute because rates might go up. But before they do, some people are considering a tracker as kind of a stopgap because they're actually cheaper than a lot of fixed mortgages now. And you can normally get off them at any time. So, you know, if you're considering one of these niche moves, brokers are really helpful. a really good time to look at your savings as well check there in the the best account possible when the base rate doesn't go down savings rates tend to stay the same and there are still some really really good rates out there sort of close to four and a half percent on easy access in some cases you know fixed rate accounts as well looking quite good at the moment and obviously we've got a fresh ISA allowance as well so do make sure that you're making the most of your tax-free savings allowance definitely still worth looking at savings accounts and switching where you can.

33:45I'll tell you what I think is interesting, gilts and gilt yields. You can pick up 5.057 % on the 10-year gilt yield at the moment, right? I think we're going to see continued interest from people investing directly in gilts. Now, you know, that yield could go up further, but it's already gone up in the expectation of interest rate rises. If the yield goes up further and you've bought a bond at this yield, then the price of the bond that you've bought will fall, right? So temporarily, you might end up with the money that you've put in down, the capital you've put in down. But over the longer term, I could definitely see rates over the next 10 years coming down from here.

34:30and if that happens and the yields fall then the the price of the bond goes up and you can make a capital gain and the capital gains that you make on gilts are capital gains tax free which is why there's been quite a lot of interest from people buying short-dated gilts to try and cash in on this something we've talked about on the podcast before and i think we're going to see continued interest as i said from individual investors buying gilts direct all right then the additional rate of tax, like inheritance tax, was meant to be something for the super wealthy. A tiny proportion of people to pay it.

35:09But more and more, can we say ordinary folk are being pulled into the net? Some new data, though, has come from HMRC showing that in just a two-year period, so between the 2022-23 and 23-24 tax years, the number of taxpayers in the 45 % bracket rose 57%. Now, either a heck of a lot of rich people moved to the UK in that time and started paying tax, or I think this might be fiscal drag. And by the way, this is not Labour's doing. right firstly a bit of a 101 income tax bans how do they work income tax the money that you pay on your earnings there are three official bans in england wales and northern ireland we're going to leave scotland out of this and i apologize to anybody in scotland but scotland has its own rates of income tax and it's got more of them okay so there's the 20 percent band right which is charged on earnings of£12 ,570 or more, right?

36:22Up to that, you have your tax-free personal allowance and you don't pay any taxes, 0%. Basic rate is charged at 20 % from£12 ,571 to£50 ,270. Above£50 ,270, you then start paying the 40 % rate, which goes up to£125 ,140. and above 125 ,140 you pay the 45 % rate. There is however an unofficial income tax band which is 60 % and that is not paid by the people earning the most. Instead it's paid by people earning between£100 ,000 and£125 ,140 £40 because they have their personal allowance removed at a rate of£1 for every extra£2 that they earn. And that creates an effective marginal tax rate, which is the tax that you pay on the next pound earned, of 60%.

37:25So actually, tax bans in this country go 20, 40, 60, 45. Why are so many people suddenly paying 45 % tax? It is, as you say, epic fiscal drag, but it's not just the normal fiscal drag where the threshold remains frozen. It's the kind of fiscal drag where someone decides to lower the threshold from£150 ,000 to£125 ,000,£140 ,000. strangely precise number to lower it to and that's because it's right at the top of that 60 % tax trap and the person who did this as you said was not rachel reeves this is a tax grab that you cannot blame on rachel reeves rachel reeves has continued the tax grab and frozen tax thresholds until uh the end of time i believe at which point everyone will eventually be paying 45 % tax But this one is not her fault.

38:28This one is Jeremy Hunt's fault. Jeremy Hunt came in as Chancellor after the ill-fated and short-lived stint that Quasi Quarteng enjoyed. One of the things that Quasi Quarteng did in his mini-budget, Quasi Quarteng actually removed the top rate of 45p top rate of tax. That didn't last very long because Quasi Quarteng had to be thrown out on his ear. Jeremy Hunt had to come in and do his fun police routine where he reintroduced the 45p tax ban and dropped it down to just over 125 grand rather than 150 ,000. Hence the fact that all of a sudden the number of people paying it went up 57%. The tax years we're talking about here, 2022, 2023 to 2023, 2024.

39:14So obviously these numbers, although they're the most recent available, are massively out of date. And there's going to be a lot more people paying that level of tax now. A lot more people paying 40 % tax as well. Right. The Iran conflict has plunged many holiday plans into chaos. Rising prices, no-go areas. But there are still deals to be had if you are yet to book your summer getaway. Cork, anyone? How about Dortmund? Pologne? Baden-Baden? Basically anywhere in Germany, it seems, here, Helen? Yeah, I mean, unfortunately, what's happened is that going anywhere normal has become well expensive.

39:55I recently had to book tickets to Barcelona because I'd already booked a festival ticket, which is coming up in a couple of months. And I stupidly hadn't booked the flights at the same time I bought the ticket for the festival. £500 for a return to Barcelona, in fairness, including a bag, to be fair, which is quite a chunk of that money. but yeah going to normal places is now incredibly expensive so if you haven't booked your summer holiday yet you might want to look at some of these less traveled destinations on the list so this is um from sky scanner the flight comparison website and they've looked at basically the 10 cheapest spots um for to fly to this doesn't include hotels so you do obviously need to look at the price of that as well it's only worth having a cheap flight if you know you're not paying 300 quid a night for your hotel.

40:50But all these places have flights for less than£125 per person. So people are paying an average of£253 at the minute to go on a summer holiday. So this is essentially half price than what you'd expect to pay. Number one on the list, Dortmund,£72 for an average economy seat. I'd try going to Dortmund. They're second in the Bundesliga. I've been looking on their Wikipedia. Georgie, it looks all right. They've got a lovely lovely looking opera house. Apparently it's one of the least stressed cities in the world. Hasn't got a beach, but it looks okay. Some nice old buildings. Germany gets hot in the summer as well.

41:28So, you know, if you want a bit of a city heat thing. It's got lovely countryside as well. And if you go out of the cities, you've got lots of lakes and the Germans are allowed to swim in their lakes, unlike the Brits for some reason. I didn't know that, Simon. OK, so this is money sponsored by the German Tourism Board. Anyone else? So, as I said, Cork, number two,£83 a person. It could be quite nice. It's got good scenery as well. So, number three, Luxembourg. I think you hit a bit of a problem there because it's£86 to fly to Luxembourg City. Now, I'm only guessing, but I imagine a hotel in Luxembourg would probably be a jillion pounds a night.

42:07So, maybe, you know, look, it's just a really expensive place, isn't it, Luxembourg? It's tiny. Well, but the advantage of it being tiny is it's also really easy to leave and go somewhere else. Yeah, exactly. No offence to people in Luxembourg. I've never been to Luxembourg. It might be great. Let us know. Where else have we got on the list? Yeah, so there is some more, a bit further down, there's slightly more expensive places. There's some more classic sort of holiday locations. So Castellón de la Plana, probably haven't pronounced that right, in Spain. It's just an hour's drive away from Valencia.

42:36That's£89 or Turin in Italy,£102. pounds. Baden-Baden, it's got some lovely spas,£89. Eindhoven, Cologne, Jersey. Jersey's nice and sunny in the summer. And Trapani in Italy. So they all come in under£125. All right then, Simon, you start of the week. £2 billion. That is what NatWest's profits were in the first quarter of this year. So that's only in three months. £2 billion, having generated£4.4 billion of revenues. That is up 12 % on a year earlier. The net interest margin, the difference between what it makes on loans and pays on savings, rose to 2.47 % from 2.27 % a year earlier. And NatWest is just the latest bank to tell us that it is profiting from the fact that interest rates are staying higher for longer than thought and are potentially going to go up.

43:34And talking about mortgage rates earlier, the banks have been benefiting from this mortgage rate rise. So yeah, good news for banks, bad news for everyone else. It's not because the banks are all right. You can keep up and stay with all the latest Breaking Money. You just go to thisismoney.co.uk or download the app. And if you have any comments or questions for the team, anything you'd like them to look into, Simon? You can email us at podcast at thisismoney.co.uk and come to thisismoney.co.uk forward slash podcast to join in the debate and read the comments. And if you like our podcast, well, rate us wherever you found us.

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