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If the CGT policy were at all tenable (it's not politically, but should be), the implementation would likely start for gains in the future, and not back-dated.
We're not going to see 400% gains in the next decade or two (base rates are not going back to 0%), and the government would have to engage in unrealistic levels of QE and demand-side pumping to make anything close to that level of housing inflation happen again.
So in that instance, old Flo can happily downsize, banking 40 years worth of inflation untaxed, and probably outbid younger families for the already low number of 1–2 bedroom starter homes in the country.
This country's housing policy is fucked.
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I'm also still seeing no downsides to 100% inheritance tax, apart from salty rich guys.
I can understand why a youngster who is struggling with affording rent and dickhead landlords and has no prospect of housing security and who is depending on inheriting family wealth to get stability and a comfortable life would feel 100% IHT is unfair.
The point is that if property were cheaper, not commoditised and renters given rock solid protections, they would have less "need" to depend on inheriting their parents wealth.
Edit: Although to be fair, 100% IHT would have quite far reaching implications in terms of HNW families in the UK. I have no idea whether it would end up being a sensible thing to aim for. I can fully get behind the principle though.
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The best IHT policy i read was just to treat it as a taxable income receipt for the recipient, rather than taxing the estate. So if you give it to people who are already higher rate taxpayers, they pay more tax; if it goes to lower rate ones (and is spread out so the receipt doesn’t push them into being higher rate taxpayers) they pay less. Seems pretty fair to me…
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We're not going to see 400% gains in the next decade or two
I bought a property in London in 2016 and it dropped in value by 10% by 2021. I reckon it'll be another 15 to 20 years before we see another property silly season in the UK.
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You could probably map nominal house prices onto the viewing figures of 'Location, Location, Location' and 'Homes Under The Hammer' in the last few decades.
I predict a 'Changing Rooms' reboot in about 2037.
Edit: well fuck, looks like they relaunched that in 2021… https://en.wikipedia.org/wiki/Changing_Rooms
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Sunak bounce more like Sunak splat?
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The rich can afford to find ways to avoid it. They have access to solicitors, accountants, tax heavens etc.
The 7 years rule has to go for sure.
A good friend of mine had his parents sign over the family farm and industrial property to him recently. If one of his parents survive for 7 years, there will be no IHT payable. Property portfolio probably worth upwards of £40m (on the basis that lots of it is ikely to get planning permission for housing development).
Edit: Just to add, the land was bought by his Grandad for about £100k in the 1950s. Adjusted for inflation, about a x13 increase in value.
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That obviously hasn't made their housing market any less of a shitshow than here.
I quite like the US approach to mortgages though...none of this 2 year fix bullshit.
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Hmm... Subprime though.
Plenty of sub prime mortgage products on offer in the UK too!
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If I live to be 1000, I will never buy another JCB digger.
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The products that caused the problems in 07-08 were the ones that didn't have 30 year fixed rates (because borrowers couldn't pay when the initial teaser rates expired).
However, I suspect the UK government's appetite to guarantee everyone's mortgage is quite low. Probably the demand for 30 year fixed rate GBP paper is similarly low and would crowd out the government's own borrowing needs. Helps to have the global reserve currency sometimes!
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There's nothing inherently wrong with sub prime mortgages, either. It's a social net positive for people to have a secure home, even if purchased with 100% mortgages and temporarily underwater with some reasonably small amount of negative equity. It's still cheaper and more secure than renting if you're buying a place to live for 4+ years.
Sadly we didn't seem to learn the right thing from '08 — most mortgages in the US are still immediately repackaged/sold, and a lot of regulation added here was more about putting the boot on potential borrowers (higher deposit requirements, stress test), rather than the banks taking on a bit of risk, reflecting it in slightly higher rates, and not allowing bonkers housing inflation for a decade.
More recently, too, when all >90% mortgage products were removed, it'll only keep more people out of homeownership, and in insecure tenancies.
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most mortgages in the US are still immediately repackaged/sold
This is a feature, not a bug.
The only way that 30 year fixed rate mortgages work is if they can be held by someone that has 30 year liabilities to fund them with. The average bank is funded with current accounts and shortish-duration savings products so cannot do this. You need to put them in a form that an insurance company can buy (i.e. MBS). Done right, with a government credit wrap, it's a beautifully efficient system.
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Weirdly though, the US have that with Fannie Mae anyway, so it seems peculiar that they still need the repackaging. I'm not going to pretend I know how all this works — i'm sure with the right regulation, it could still be a good system.
And, as here, hasn't the 'money multiplier' income model for banks been debunked somewhat, since private banks create new money with new lending?
(Gonna change my username now — don't want work checking up on me chatting shit about banks during work hours…)
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Weirdly though, the US have that with Fannie Mae anyway, so it seems peculiar that they still need the repackaging
Fannie (and the other agencies) are the repackager. The agencies buy loans from banks / other originators and fund those purchases by issuing MBS. MBS are acquired by a whole host of buyers including insurers and pension funds (at the senior end) and credit funds (at the junior end). MBS are guaranteed by the issuing agency and the agency is backstopped by the federal government.
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And, as here, hasn't the 'money multiplier' income model for banks been debunked somewhat, since private banks create new money with new lending?
Yes, but I don't totally understand how that relates to my comment. My point is that most banks would have an ALM mismatching problem if their assets were composed of 30-year fixed rate mortgages and their liabilities of 0-5 year deposits.
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Fannie (and the other agencies) are the repackager.
Thanks, that's the bit I was missing — makes a lot of sense.
The average bank is funded with current accounts and shortish-duration savings products so cannot do this.
My money multiplier comment was more aimed at this. As I understand it — and this is a bit basic, I'll admit — is that if you throw out the Diamond-Dybvig model, there's no actual connection between their long term assets/mortgages and their short term liabilities/giving out deposits. So in theory we could have 30-year fixes, from new money, because the balances are unrelated, and a bank's ability to pay its deposits is more about their other services.
Or is that too simplistic?
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So in theory we could have 30-year fixes, from new money, because the balances are unrelated, and a bank's ability to pay its deposits is more about their other services.
I think this is where it's important to distinguish between the system as a whole and any individual bank. At the system-level, yes, duration mismatch does not exist because loans and deposits are always in balance (as they mutually create and destroy each other). However, any individual bank is still at risk of bank runs if all of the depositors decide to move their money to another bank.
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The fall of the Tory party
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@skydancer
I'm also still seeing no downsides to 100% inheritance tax, apart from salty rich guys.