According to the Paragon Group – a mortgage buy-to-let company – the rental market is about to experience an increase in rental prices. As many as 40% of landlords are about to hike up their charges by as much as 8% in some regions. Is this due to the current trend related to house repossessions – or something else?
The truth is it’s related to a combination of factors:
- there are more students looking for rental properties
- there are more and more incidents whereby people cannot secure a mortgage
- the influx of migrants into the UK
The above are all – unfortunately – influencing the trend.
When you also add in the fact that more homes are being repossessed – it’s clear why landlords are in such a strong position – demand is rising at a faster rate than supply. Is this good news for the housing market? That depends on which side of the fence you’re on.
If you’re a landlord, or you’re about to break into the property market in the UK – then the answer is a resounding yes. If you’re looking to rent a property, then it’s an equally resounding no. As a matter of fact my sons have just discovered (as they’re about to renew the lease on their jointly shared apartment) that their landlord has hiked up their rent by a whopping 10%.
Obviously the decision is not one they want to hear – just because they’re renting does not mean that their bank accounts can cope with the increase. In fact – renting and being financially secure are not mutually exclusive. Often it’s quite the opposite.
This is more likely the case in the event that a prospective tenant has just gone through the house repossession process. Losing your home isn’t always cost free. Plus the reasons surrounding the loss are always related to a lack of financial stability in the first place. In short – it sucks.
For my son’s part, they’ve only been renting their apartment for 12 months. If their landlord keeps hiking up the rent by 10% a shot, within another two years they’re going to find it really difficult to meet with the increase.
Like most people their annual income won’t rise even halfway close to 10% – over a two year period. What then? Buy? Singularly that’s an unlikely prospect. Together, a stronger one. But – where do they turn to for a mortgage?
Mortgage lenders are growing increasingly cagey about lending. Although the current leaning is for said lenders to deny that they’re tightening up on the lending criteria, those of us on the street aren’t stupid.
Currently, unless your last name is Gates and your dad’s first name is Bill – most people are finding it extremely difficult to secure a mortgage offer. But then – if Bill Gates was your dad, you wouldn’t need a mortgage anyway.
So – whilst the rental price increase may not be strictly due to the house repossessions going on around the UK – it’s certainly an important factor. Landlords are finding themselves in a very strong position – one which it would appear many are exploiting.
And we understand that. They’re running a business and businesses only exist for one reason only – and no … it’s nothing to do with supplying a great product or helping folks’ out – and everything to do with making a profit.
And let’s not forget the fact that the Government is about to start reducing housing benefit. Could things get any worse for the poor, beleaguered ex-house owner to be? I’d like to think not. However looking ahead – I think things are going to get just a little bumpier for all of us.
House repossessions are not going to flatten out anytime soon. Migration levels are unlikely to drop enough to affect the market. And young people are going to continue of their quest for higher education – despite knowing what they’ve got coming re spending cuts and price increases.
But that’s a whole other story.