UK Mortgage Rate Crisis Driving Record Rent Squeeze
Millions of renters across the UK are being squeezed by landlords passing on higher mortgage costs to their tenants, contributing to record rent increases amid the cost of living crisis. Property experts and charities warned the rapid rise in borrowing costs set by the Bank of England – which this week increased rates to 5% – was having a far broader impact than on owner-occupiers’ mortgage costs, with potential to trigger a wider crisis in affordable housing. Official figures showed private rental costs rose at an annual rate of 5% in April – the sharpest pace on records dating back to January 2016, while rents outside of London surged at the fastest rate on records dating back to 2006. It comes as growing numbers of landlords put up rents in response to their own rising costs, while those unable to increase rents are selling their properties – often pushing tenants to move. Figures from Citizens Advice show the number of people seeking help with no-fault evictions has more than quadrupled since 2019 to record levels. The Institute for Fiscal Studies warned that interest rates hitting landlords’ borrowing costs were part of the reason for a large increase in rents. Renters had also typically paid 24% more than mortgagors on average pre-pandemic. The Bank of England estimated in December that landlords would need to increase rental incomes by about 20% to offset the rise in buy-to-let mortgage costs expected at that time. “This would increase the cost of housing for renters, which may affect their resilience,” it warned. “This might lead them to default on unsecured credit, or cut consumption sharply, which could amplify the economic downturn.” Highlighting how some landlords are exiting the market amid difficulty passing on higher costs to tenants, figures from the Royal Institution of Chartered Surveyors this month show almost two-thirds of surveyors have witnessed rising numbers of buy-to-let landlords looking to sell their properties. Estate agents also argue costs linked to government legislation are leading landlords to sell, including greater protections for tenants in Michael Gove’s renters’ reform bill and new energy efficiency regulations. The measures come as almost a quarter of private rentals fail to meet decent home standards. However, shortages of private rented homes, and a lack of available social housing, are expected to drive rents up further. Lucian Cook, head of UK residential research at Savills, said: “Some buy-to-let landlords will be saying it’s just much more difficult [to keep owning a property], leaving private renters chasing limited supply.”
Tags : renters UK landlords mortgage costs tenants record rent increase living crisis property experts charities Bank of England impact affordable housing Citizens Advice Institute for Fiscal Studies Royal Institution of Chartered Surveyors