Jannah Theme License is not validated, Go to the theme options page to validate the license, You need a single license for each domain name.
World News

High mortgage costs are driving up rents across the UK | Interest rate


This is a tale of two markets: as private rents hit record levels in the UK, making life precarious for tenants, the sales sector slowed sharply and property values ​​began to fall, with steeper declines expected next year.

The latest house price index from Nationwide, Britain’s largest building society, along with Bank of England mortgage data due this week, should shed more light on the severity of the UK’s housing downturn. -United.

The market was cooling and mortgage rates were rising, even before the Truss government’s disastrous mini-budget abruptly halted the pandemic-era housing boom.

Mortgage rates jumped well above 6%, a level last seen in 2008, adding hundreds of pounds to mortgage payments and causing demand to collapse. Unsurprisingly, Nationwide’s figures for October showed the first monthly decline in house prices in 15 months: at 0.9%, it was the biggest drop since June 2020.

Expensive mortgages have deterred many first-time buyers, who are now renting instead in the hope that rates will drop in the new year – causing competition to intensify in the rental market, according to property site Rightmove.

But this is not the only explanation for the surge in rents. Tenants who work from home prefer, if they can afford it, to live alone rather than in a cramped shared apartment, explains Andrew Wishart of Capital Economics. The number of people renting a property alone increased by 530,000 in 2020-21, while the number of renters in a household of three or more people fell by 2 million.

Wishart suggests that cost-of-living pressures could reverse this trend somewhat. “But with an average rental of four years, that won’t happen overnight,” he says, adding that buy-to-let landlords face a serious financial crisis over the next few years and many could sell, which would further reduce supply.

This shortage of rentals has, unsurprisingly, driven up the amount tenants are willing to pay. London-based estate agent Foxtons reported a 22% year-on-year increase in rents in the capital in the first nine months of 2022. Average rent hit a new high of £571 a week, around £100 more only at the beginning of the year.

Record number of new tenants registered in the third quarter: there were 30 for every property listed, about three times recent levels. At the same time, supply has become scarce: new orders from London landlords fell 18% in the first nine months compared to a year ago.

Foxtons describes London’s rental market conditions as “amazing”, adding that the “impact of the post-Covid return to the city has been acute”.

Supply issues have been exacerbated by an increase in overseas student tenants and business rentals, and by 11% of landlords choosing to sell their property at the end of a lease this year.

According to research published by Rightmove last month, advertised rents jumped even more in some other cities and towns. These include Newbury, Manchester and Cardiff, all of which have seen annual increases of nearly 20% or more. Rents are expected to rise further next year, while property prices are expected to reverse, with many experts predicting declines of between 5% and 12%.

Capital Economics predicts that real estate transactions will fall to their lowest level in a decade in 2023 and that the average house price will fall by 12%. Rightmove estimated a lower drop of up to 5%, while real estate company JLL predicts a drop of 6%.

Meanwhile, interest rates are still on an upward trajectory, with the Bank of England planning to raise them another half point to 3.5% in mid-December. Rates are expected to peak at 4.25% next spring, lower than previously feared.

“While mortgage rates are expected to fall back to 4% by 2024, we believe house prices will need to fall 12% before affordability improves enough for demand to pick up and prices to decline. hit rock bottom,” Wishart said.

theguardian Gt

Not all news on the site expresses the point of view of the site, but we transmit this news automatically and translate it through programmatic technology on the site and not from a human editor.
Back to top button