Rising rental prices have put increased pressure on renters
With rental prices soaring it’s thought that some tenants could be forced onto the property ladder.
Increases in property rents, rising faster than wages, have put more people under greater pressure to consider alterative options.
For many, however, the rent increases, high inflation and the cost-of-living crisis generally, have made it even more difficult to save for a deposit, according to Dominik Lipnicki (pictured), director of Your Mortgage Decisions. And, of course, the market has seen rising house prices,
Furthermore, the market is experiencing higher mortgage costs, coupled with tighter lending criteria, particularly when it comes to affordability.
“This is why we are not seeing an avalanche of renters applying for mortgages, and I do not expect that to change,” he said. “In reality, people who are fortunate enough to get on the housing ladder, often do this as a result of inheritance or the bank of mum and dad.”
Lipnicki said a shrinking pool of people being able to afford a mortgage could also reduce fluidity in the housing market.
“Renting by choice can be a great idea, particularly for those needing a short to medium term solution, or when they believe that house prices will fall; many of those renting however, would welcome having a choice in the first place,” Lipnicki said.
Samuel Mather-Holgate, independent financial adviser at Mather and Murray Financial, said higher rents were a result of a year of rate increases by the central bank, in its ‘floored attempt to curb inflation.’
“Renters are not looking at buying property as a cheaper option, but they are frustrated by landlords passing the increased mortgage costs onto them,” he said.
Mather-Holgate said when mortgage costs came down, in the second half of the year, renters may then think about entering into the housing market; until then, they are caught between a rock and a hard place.
Seeking advice
Graham Cox, founder at Self Employed Mortgage Hub, said a large portion of his clients were self-employed first-time buyers, of which, many were ‘fed up with paying through the nose to rent what is often a poorly maintained property.’
He explained: “We have also had a few cases recently of clients looking to buy from their landlords, often at discounted prices.”
Cox said paying for a mortgage was still seen as a cheaper option, and by and large, it still was, even with higher mortgage rates.
“Landlords have been raising rents in response to their own mortgages going up, so it is a vicious circle,” Cox said.
Lewis Shaw, owner and mortgage broker at Riverside Mortgages, said he had seen a surge in buyers seeking out mortgage advice.
He said this has come under circumstances where their landlords had either decided to sell up due to rising buy-to-let rates turning positive investments into liabilities with almost no profit, or they had hiked the rent to cover the increased mortgage rates, which was crippling tenants.
“Perhaps 100% loan-to-value (LTV) mortgages are a good idea to allow renters to buy their rental homes, with the inevitable surge in buy-to-let properties about to hit the market,” Shaw said.
Have you seen an increase in renters seeking out mortgage advice? Let us know in the comment section below.
