Warning over Trusts and Landlord Mortgages

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They offer life insurance policies starting at just $276 a year for $1 million in coverage. Don't wait for life to make other plans. Protect your family today. Head to policygenius.com. Hello, welcome to this Moneybox podcast. Interest rates on buy-to-let mortgages fall to their lowest level in almost three years. What does that mean for landlords?

The state pension looks set to increase in April by more than inflation. That would mean an extra £500 a year for many. And why are house prices rising faster in Northern Ireland than in the rest of the UK?

But first, top lawyers have told Moneybox that people across the UK are being misled into paying thousands of pounds for products which they're told will protect the value of their home from inheritance tax or being taken to pay for care home fees. In reality, they say these schemes do not work and may trigger legal complications and huge financial costs in the future. Usually, the products involve setting up some sort of trust, but they are often sold by people who are not solicitors.

and are not regulated. The Association of Lifetime Lawyers surveyed over 100 of its own members and found 95% said they'd seen such products being missold. More than four in five of them said they had clients who had been misled. Walter Dan Whitworth's been given an exclusive look at the survey. Dan, what are the association's biggest concerns?

Well, it says this isn't about multi-millionaires paying expensive financial advisors to put money into trusts which may help them reduce their tax bill. This is about normal, everyday people being reeled in, often by offers of things like free financial advice.

or cheap will writing services and then at best being missold or at worst being lied to about the benefits of putting their home or money into trusts. Sometimes what the association describes as predatory operators will charm their victims with promises. And what are the problems being caused by this?

Well, I'll give you an example. Paula was hooked in during a free retirement seminar from someone who then visited her home. Now, she has a severely mentally challenged adult son who lived with her at the time, and Paula wanted to make sure he could stay living in her house if she ever...

had to go into a home. Now she was persuaded into paying several thousand pounds for legal work to put her home into a trust which she was promised would mean it couldn't be used to pay for care home fees. This was a lie. And for context, Paul, we're talking about a two-bed semi worth around £190,000.

Now, when Paula eventually found several years later that she'd been misled, it cost her another several thousand pounds, not to mention a year of stress, before she was able to extract herself from the legal mess she'd been left in. It was really, really frightening. Many, many sleepless nights because this is my home. It's about the only asset I had. And I really didn't have the money.

To buy my way out of the situation, I thought at the time, I had no idea how long it was going to take, and I had no idea really. if it was all going to be resolved safely in the end. So I was absolutely panicking. It was really, really difficult. It turns out that it cost me about probably nearly £4,000 overall. But I think it was the emotional stress because I just thought I was going to be absolutely stuck. And I was just completely distraught because at the time...

That was a lot of money to me. It's all relative, isn't it? For other people, it's cost them many thousands. I know. Now, worse than Paul are people who may be facing serious tax implications of putting their money into a trust. One case I've been told about Paul is a man who has missold a trust for his £800,000 home. Now, he wouldn't have even had to pay any inheritance.

inheritance tax but he's now facing a tax bill from hmrc of more than 100 000 pounds and even worse some people don't actually know their victims yet very often people don't learn the truth until a loved one moves into a

Thanks, Dan. Well, with me in the London studio is Jade Garney, Chair of the Association of Lifetime Lawyers, which did that survey of its members. Jade Garney, were you surprised at the response of your members about the extent of this problem? Sadly, I wasn't surprised. It's something that I've seen occurring many times in my own practice and the voices of the members show that this is echoed up and down the country. And why don't these schemes work?

There are very strict rules surrounding trusts and inheritance tax and care fees. And essentially, there are kind of situations in which you can be caught out. So the strict rules involve... Things like deliberate deprivation, so that is where a local authority deem you to have taken an action or a course of action that...

is solely for the purpose of depriving them of assets for carefree funding. If that's the case, they can take you to court and they can unwind the planning that you've done. Similarly, for inheritance tax, you are entitled to make gifts and transfer things in. to trust. However, there are strict rules. And one of those is that you cannot retain a benefit in the asset that you are giving away in order for it to be a true gift. And also if it's a lot of money, then you can have to pay.

charges to put it into the trust can't you when regularly after that and you mentioned deliberate deprivation of course if you if you do take one of these trusts you are deliberately doing that and that is counts as deliberate deprivation so so they don't work but we do know that wealthy

families put money in trusts, don't we? And we've had emails from people this morning who've put a trust, or their parents have, and they're now scared where to get good advice to find out if they've been missold. Absolutely. I would recommend that they look for practitioners who are either accredited with the Association of Lifetime Lawyers or the Society of Trust and Estate Practitioners. They are the gold standard for this type of work.

They have strict rules about the knowledge that you need to have and the exams that you have to pass, as well as the standards that you need to uphold for the public. Yes, and the importance of going to a solicitor, which is a regulated word. No one can say they are or they aren't. But you can say you're a lawyer or a paralegal or whatever, even if you're not. they're not regulated are they? A lot of the companies that do this are not regulated.

Yeah, we found from our survey that the majority of these cases involved unregulated individuals. And that's because anybody can go out and set up a company that deals with this, regardless of qualifications. And that means, you say regardless of qualifications, but it also means...

No compensation if things go horribly wrong. Now, this has been happening for years. I've written about it in the past, but it is getting worse. Is that because more people are worried about inheritance tax because of these changes we know are going to happen?

as we fear might happen. I think that will definitely be a contributing factor as we face the changes to pensions, for example, that will soon be taxed for inheritance tax. We see more people wanting to estate plan with other assets in their estate. So it is an increasing issue. But if you want to do that, go to a solicitor, not somebody you might meet in. Some of these are sold at seminars in hotels, aren't they? Which is not the ideal place to get legal advice.

You obviously see a big problem here. You see a growing problem. How can it be stopped or at least reduced? Really, I mean, we're calling for greater public education on the matter so that they understand and can identify the red flags when they're there of these predatory practices. But ultimately, it'll be down to the government and regulators to address this growing. very scary problem. Do you think it should only be solicitors who can sell trust?

I think that any trust work, whether in your lifetime or in your will, should be provided by a regulated individual. And so, yes, all solicitors are regulated by the SRA.

Just to go back to inheritance stats, which we mentioned, is it worth reminding people that despite all the changes that are planned, only one in 10 estates will pay it. So most people don't need to worry about it. Correct. Yes, a lot of the clients that I've seen have a combined... to state if they're a couple under a million pounds and if you have children then at the moment you can leave up to a million pounds without paying any inheritance tax whatsoever.

So there's no need to do anything. And very briefly, in a word, if you've been tempted by this, what are the danger signs to spot? Very briefly, in a word. They ordinarily get people in offering very cheap wills and advising you not to see a solicitor because we're far too expensive is the misnomer. And then they will start aggressively upselling to you. They may give you written advice that's complicated.

or discourage you from discussing your plans with your family or other professionals. Warning signs indeed. Jade Garney of the Association of Lifetime Lawyers, thanks. And we did ask the government about those calls for tighter regulation, but it's not yet responded.

Interest rates on buy-to-let mortgages have dipped to their lowest level in almost three years. And there's more choice of mortgage products for buy-to-let as well. The data, which comes from MoneyFacts, might be good news for any landlords coming to the end of a two-year fix when rates were high. but not for those who fixed five years ago when rates were of course much lower.

The past few years have seen other changes for landlords. Mortgage tax relief restricted in 2020, second home stamp duty surcharges increased and stricter energy efficiency rules for rented homes promised in the near future. Elisa has a property which she rents out. She has a five-year fix, interest only, buy-to-let mortgage, which runs out in 2027. I'm finding it fairly thankless at the moment, and I think...

particularly because I've only got one property. My rationale for having a rental property, all the reasons I originally wanted to keep it as a rental property, have been somewhat squashed. by the financial constraints that are being applied now across the board, that's mortgages, insurance costs, tax, that all seems to be going up and it seems to be going up. much more frequently than it has ever felt like it has done before. That was Ailsa and Mahara own several mortgaged properties.

Some of them are fixed and some of them are coming to renewal dates, which means we're going to have to start looking at what the rates are. We fixed them when the rates were quite low. And that was when the pandemic was happening. The rates were really good, 3.5. 3.6 obviously with the renewals coming up now we'll potentially be looking at the 5.5 percent mark and a lot of people don't realize

They think, oh, they see a landlord banner and they think, oh, you've got lots of money coming in. But that's not the reality. As a landlord, there's always constant pressures like maintenance budgets, ad hoc repairs, servicing, gas, electrical certificates. Things are always chipping away at your bottom line.

Listening to that is David Hollingworth, the Associate Director of L&C Mortgages. David Hollingworth, these latest figures show there are now lower rates than a few years ago, I think 4.88% for a two-year fix I saw. And Mahara thinks, though, she'll have to pay more. More than that, 5.5%. How easy is it to get the best deals? Hi, Paul. Yeah, rates have obviously been easing, and just as they have for the homeowner market, that's been passed through.

to the mortgage rates on offer to landlords so there's some good news there and rates will be looking better than as you say a couple of years ago but still probably at least double what they were four or five years ago. Landlords also are likely to have to meet... tougher lender criteria which has come into play and lenders have looked to try and flex that and make it as individual as they possibly can but ultimately they may need more rent with higher interest rates.

to cover the kind of borrowing that they're after. So there's another squeeze there in terms of what the criteria on offer is. Yes, they're sort of regulatory changes that have happened since they last took out a mortgage. And what about arrangement fees? I saw they were quite high for some of the best deals.

Yeah, so you can get really low interest rates on buy to let. But what lenders have been trying to do is give landlords at least an option when market conditions have been tougher to actually push down. the the monthly cost but there is a trade-off there and that is a much bigger arrangement fee so you'll see really quite significant percentage fees charged as a percentage of the mortgage and those those could even

be 7% to 10%. Yes, you've got to get good advice to do those calculations to see what's worthwhile. Now, Ailsa there said she feels squashed by all the changes and says being a landlord is thankless. She seemed to me to be wondering... whether to get out of it. Is that common for people who've just got one, maybe two properties? So I think the boom that we saw with amateur landlords when it felt like they were beating first-time buyers to... all the property that was on on the market

I think that's shifted around. The cost of entry is much higher with the stamp duty surcharge that's payable. And landlords are having to rethink what the numbers will look like with the changes in tax relief and what kind of... what kind of margin there might be in there.

But there are more professional landlords who will still be looking to add to their portfolio. We've seen an increase in the number of properties being purchased through limited company, which may be more tax advantageous, particularly for those more professional landlords. who are looking to...

grow a business. And I suppose that professionalisation might actually be good for tenants. And we did talk to some tenants a couple of few weeks ago on Moneybox Live and they didn't have much sympathy for landlords. They said rents are going up, we've got other issues. But then we had an email from Steve this morning who says he's a landlord and he's having...

problems evicting troublesome tenants, as he calls them, and it caused him unbelievable distress. So there are two sides to that relationship. Would a professionalisation help that relationship? That certainly looks to be... the direction of travel. And I think some landlords will be having to look at properties that they own and decide whether they still make sense for them. But of course, we do need good quality private rented property.

Those that are sticking there, I'm sure, are trying to keep rents as low as they can. But with higher interest rates, it does have knock-on for the tenant as well. David Hollingworth of London and Country, thanks. And of course, there is the Renters' Rights Bill, which the Ministry of Housing told us would give tenants greater security, but also give landlords stronger powers to take action against tenants.

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The state pension will go up in April and the latest information on wages lets us work out pretty much what that rise will be. Dan's still here and can tell us more. Well, this is the so-called triple lock. It means that every year the state pension will rise by at least 2.5%. But if inflation or wages are rising faster than that, it will go up by whichever is the higher of those. The data published this week show that...

average wages rose 4.7% in the May to July quarter. That's obviously more than 2.5% and is also very likely to be higher than inflation. So if wages... go up by 4.7% and that figure is used, how much might pensions go up? Right, so the triple lock applies to the standard rates of the old and the new state pension. So, with the new state pension, and that's paid to people who reach pension age as from April 2016, it should go up...

to £241.05 a week. Now that's an increase of just over £560 a year. Now older pensioners on the basic state pension will see a rise of £8.30 a week or just over £430. a year. Now, some people get extra amounts on top of the standard rates and any extras above those standard rates, well, they'll go up with inflation, not the triple lock. And when will we know the final answers?

OK, so the inflation figure that is used is published on October the 22nd. That's the final version of it. But I must add, Paul, that the wage rise of 4.7% is provisional and it may be amended when the final figure is published. on October 16th. Thanks very much Dan.

House prices are rising twice as fast in Northern Ireland as in the rest of the UK. The Office for National Statistics says they rose 5.5% in the 12 months to July. In Scotland, the rise was 3.3% with 2.7%. in England and just 2% in Wales. Those figures are simply the latest in a long trend of house prices rising more in Northern Ireland than the rest of the UK. Our reporter, Ima Devlin, reports. I'm in Bangor. Count it on.

a coastal town in the Ards and North Down area of Northern Ireland. But I'm not here to watch the boats at the marina or the seagulls flying overhead. I'm here to find out about the cost of housing and why it's rising more quickly in Northern Ireland than other parts of the UK.

So I bought my house two years ago and my sister bought hers just a couple of months ago. And it's this equivalent house, except mine's detached, hers is semi-attached, and hers was £30,000 more within two years. It's not worth £30,000 more. than my house was. That's only because of house prices going up. We bought four years ago. Are you looking at moving or are you happy to step in?

We're happy to stay put at the minute because I think the house prices are so high. For example, I think when we bought our house it was £170,000 and now we could probably get £250,000 for it. So you're seeing that increase. in the other houses that you'd be looking to buy as well. It was very hard to get a house because every time you try to pay the market price, there are so many people who want the same house. So you have to pay 10%.

on top of the actual house price to get that house. Generally, the cost of housing, whether it's rental or just the price of a property, has gone beyond the reach of so many people. It's really sad because people are struggling as it is with day-to-day living and the overheads that they have to pay for. I'm Victoria Pinkerton. I'm managing director of an estate agency approaching its 20th year in Ards and Northdown. What is the market like here at the minute?

We are seeing demand is outweighing supply. People are reluctant to put their property on the market because they want to ensure that they have got somewhere to go to. And what kinds of factors are driving those increases in prices? Especially more so at the lower end of the market, the high rental prices that we're seeing. So we would have had potential first-time buyers.

sitting still in rented accommodation and they were quite happy to do so but with the rental prices being so high they are taking that leap and being first-time buyers sooner than perhaps maybe what they would have wanted. We're still seeing people moving back. home from the mainland, the option for remote working. Those sort of clients are still benefiting from the higher salary.

that people get across the water. I anticipate that values will continue to rise, albeit at a more measured pace than the rapid increases we've seen over the past 12 months. Estate agent Victoria Pinkerton ending that report from Ema Devlin. Listening to that is Mary Lou Press, president of Property Mark, a professional body for property agents. Mary Lou Press, those people in Bangor have certainly noticed the increase in house prices.

Is that being seen across the whole of Northern Ireland? Hi, Paul. Yes, that is exactly the case everywhere in Northern Ireland. And why is that? Well, it is. It's demand is outstripping supply. You have five or six buyers per property and they're literally bidding against each other. And the demand is just incredible at the moment. Yes. But our house prices in Northern Ireland are still lower than the rest of the UK, aren't they?

They are very much so. The average house price in the UK or in England is, you know, around £285,000 where in Northern Ireland you're about £185,000 to £190,000. Yes, I suppose the rise in wages might have helped as well, because wages in Northern Ireland, I believe, have gone up in recent years. And I think the Northern Ireland Statistical Agency says they rose.

10.9% in just one year up to April 25. Does that make homes more affordable in Northern Ireland? Well, that's the case. First-time buyers have a better budget nowadays and they have better, you know, they've... They make better choices probably. And the fact that they can afford a property, they will bid a little bit more for it. But because there's so many of them bidding against each other, that's what keeps putting the prices up. Yes, we heard from that man in Bangor saying...

People had to add 10% in order to secure it. So it is demand pushing it up. And is that partly because high rents in Northern Ireland are pushing people who currently choose to rent to buy instead? Because that can even be... cheaper than renting? It's hard to guess because the rental market is incredible and the rentals are extremely high at the moment. You'd wonder why anyone would pay £1,500, £2,000 for a rent when they could get a mortgage for slightly less than that.

Yeah, so that's also pushing prices up. Now, demand is one side of it, supply is the other, isn't it? Are enough homes being built in Northern Ireland? Definitely not. There are not enough houses being built and we have a problem with that across the board, whether it's problems with infrastructure or... NI Water, different issues there that they're claiming that there's not enough to build homes. But I just don't believe that would be the case. I think we really need to.

focus on building more and more homes for Northern Ireland. As you can see how many buyers are coming home and wanting to settle here because prices are more affordable, even though I understand that they're much higher for a lot of people out there. They are more affordable than anywhere else in the UK. And if we need more homes, if more people are going to be living here and there's much more investment into Northern Ireland.

in Ireland in the last five years and that will grow and grow is why we do need it. more homes? Yes, the Department of Communities in Northern Ireland told us it has got a plan to deliver at least 100,000 homes over the next 15 years. So I suppose that might help. But you mentioned infrastructure and Northern Ireland water, the fact that you can't get...

water and sewerage services to enough new homes. Is that really a problem, causing homes not to be built? That's the problem they're giving developers. And the developers are then being advised potentially they'll be into the cost of creating roads or new water systems into developments. But whether or not that's just a capital problem or that...

It can't be the same problem in every town across Northern Ireland. No, Northern Ireland Water told us that the problems are due to historical underinvestment, as it called it. And literally, in a word, do you see house price rises carrying on like this? Yes. That was a great word to finish, Mary Lou from Property Mark. Thanks.

Well, the price of the Moneybox podcast never goes up. It stays free, even when demand grows. And remember, you can hear the programme first and live on BBC Radio 4 at midday. every Saturday. Subscribers also get Moneybox Live. It goes out every Wednesday afternoon. Next up, Felicity Hanna is dipping her toe in the fast-flowing waters of cryptocurrency. Will she get it back? You can let us know your

Scripted finance questions and indeed answers, email moneybox at bbc.co.uk or send us a message or a voice note on WhatsApp 0306 783 183. We do read them all. You might get on the show. We've had one email. from Diana who says she did buy one of these trust plans and now she's having to spend even more money.

to get rid of it, so it is an issue among listeners who've been in touch with us. In this podcast, the reporters were Dan Whitworth and Ima Devlin, researcher Joe Krasner, studio manager Toby James. Our editor is Jess Quayle. I'm Paul Lewis, and this was the BBC News. money and work production for BBC Sounds. From BBC Radio 4 The Fort Royal Marines and Army pilots speaking for the first time

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