The Royal Institution of Chartered Surveyors (RICS) warns that landlords are feeling the heat due to the increasing interest rates, leading some to contemplate selling their properties. This trend could exacerbate the scarcity of rental accommodations and result in higher costs for tenants, according to the surveyors’ organization.
The prospect of a ban on no-fault evictions in England has also prompted landlords to reconsider their future in the market. RICS highlights that the UK housing market now faces ominous storm clouds.
With inflationary pressures taking longer than anticipated to subside, lenders predict that the Bank of England will once again raise interest rates. This unexpected surge in mortgage costs affects not only prospective homebuyers and those seeking remortgages, but also landlords and buy-to-let property owners.
The rental market is already grappling with limited supply, and the Renters Reform Bill, combined with elevated costs, is expected to exacerbate this issue. RICS, representing surveyors, emphasizes that the dwindling availability of rental homes perpetuates the demand-supply imbalance, leading to higher rental prices for the few properties on the market.
“The rental sector is also feeling the impact of interest rate hikes, and alongside the imminent reforms proposed in the government’s Renters (Reform) Bill, landlords are increasingly opting to exit the sector and sell their properties, further constricting the rental supply,” revealed Tarrant Parsons, senior economist at RICS.
A proposed legislation aims to eliminate landlords’ ability to evict tenants without justification in England, adding to the challenges faced by landlords. The broader increase in mortgage rates, as predicted by analysts, is expected to slow down the housing market. Prospective buyers may struggle to secure suitable mortgages or decide to wait for rates to decrease.
Sarah Coles, head of personal finance at investment platform Hargreaves Lansdown, commented, “Reports from agents are increasingly sounding like desperate pleas for assistance as the market’s imbalance worsens month after month.” She further added that reduced supply could drive up rents, which, given their larger impact on people’s incomes compared to mortgages, would make it even harder for renters to manage their finances.
RICS highlights that the storm clouds have gathered, affecting not only landlords but all homeowners seeking new fixed deals, as mortgage rates continue to rise. Brokers caution that those opting to weather the current hikes and switch to a standard variable rate may face substantial increases.
Aaron Strutt, a broker from Trinity Financial, noted, “A wide range of people are stuck on these super-high standard variable rates, including older borrowers unable to refinance and homeowners who do not qualify for rate switches when their fixed deals end.” He emphasized the importance of selecting a lender that treats its customers fairly when their fixed-rate periods conclude.