Due to sky-high mortgage rates, the demand for rental properties has increased as first-time purchasers opt out of the real estate market.
Rightmove, a real-estate website, reports that the number of persons making inquiries about renting properties increased by 23% in October compared to the same month last year.
The survey highlighted that there are few options for many first-time buyers who are considering renting as a temporary substitute for buying.
In comparison to the previous year, there were 4% fewer studio, one, and two-bedroom renting properties available last month.
Following the mini-budget in September, mortgage rates increased, although there have been recent indications that rates are beginning to decline.
The average five-year fixed mortgage rate fell below 6% for the first time in seven weeks earlier this week, according to Moneyfacts.co.uk.
Increases in borrowing costs brought on by the Bank of England base rate and an overall rise in prices may make it more difficult for people to save up the money needed for a down payment on a home.
“Now that there are signs that mortgage rates are settling down, the indicators are that they will stabilize at a higher level than previous buyers had been used to”
According to letting agents, there is record-breaking competition for tenants this year, with an average of 36 inquiries for each home.
According to another survey, two-fifths (42%) of prospective first-time buyers already have their entire deposit saved. This suggests that they are watching to see if mortgage rates will decrease.
Tim Bannister, Rightmove’s property expert said: “It’s completely understandable why some buyers, particularly some first-time buyers, are waiting for some more financial certainty. Now that there are signs that mortgage rates are settling down, the indicators are that they will stabilize at a higher level than previous buyers had been used to”
“If someone has their deposit saved and is ready to move, they may find that right now presents a better opportunity than a few weeks ago, particularly with more choice coming onto the market and some sellers pricing more competitively in the lead up to Christmas.”
Seventy-seven percent of tenants (or three-quarters) believe that more needs to be done to regulate renting properties pricing in the UK, according to the MFS survey.
The majority of renters’ rents cannot increase until at least March 31, 2023, thanks to emergency legislation that the Scottish Government passed last month.
Although London Mayor Sadiq Khan has called for the introduction of such rent restrictions in the UK’s capital, it appears doubtful that his concerns will be heeded.
Following the mini-Budget in September, mortgage rates skyrocketed. According to Moneyfacts, an analyst, the average two-year fixed agreement increased from 4.74 percent to 6.65 percent between September 23 and October 20.
Mortgage rates have decreased slightly since Jeremy Hunt took over as Chancellor in place of Kwasi Kwarteng and intervened to calm markets. Earlier this week, the average five-year fixed rate dropped below 6 percent.
By the start of next year, according to mortgage broker SPF Private Clients, five-year fixes might fall below 4 percent.
According to the Resolution Foundation, a think tank, the lifetime cost of getting a mortgage on a first house is currently higher than it has ever been.
The possibility of negative equity, which occurs when a buyer’s home is worth less than the loan they took out to acquire it, has increased as a result of predictions for falling home prices. They would owe the bank the difference if they had to sell everything.
The Office for Budget Responsibility predicts that during the next two years, home values will decline by 9 percent.