With the rise in borrowing costs in August and many commentators expecting a further increase at the Monetary Policy Committee's (MPC) November meeting, some potential homebuyers will be holding back from committing to a property purchase. This, combined with sustained demand for rented homes generated by the growth in the number of UK households and in the population as a whole, creates additional demand for rented homes.
As a result, yields generated by investors continue to follow a favourable trend. According to the Paragon Mortgages’ latest Buy-to-let Index, yields have increased slightly over the past quarter, rising from 6.03 per cent in May to 6.06 per cent in August.
John Heron, managing director of Paragon Mortgages, commented: “Whilst the current upward trend of borrowing costs will increase landlords’ financing costs, it also affects owner occupiers’ confidence and may discourage some buyers from purchasing, at least in the short term. This creates additional pressure on the private rented sector, with increasing numbers of people living in rented accommodation while saving for a deposit.
“On top of this, the growing numbers of migrants from EU accession states and other countries, as well as students and young professionals, swell the number of tenants living in rented homes.”
