Demand for rental homes is on the rise as potential buyers hit the pause button to see what happens with mortgage rates in the new year, according to new data.
According to Rightmove, the number of people requesting a move is up 23% from a year ago.
It comes as mortgage rates skyrocketed after Kwasi Kwarteng’s ill-fated mini budget, with average two- and five-year fixed rates topping 6.5 per cent, adding hundreds of pounds to homebuyers’ monthly payments.
Data from Rightmove suggests this has led some budding buyers to look to the rental market as a short-term alternative while they wait to see where mortgage rates go.
The number of people inquiring about a rental move is up 23% from a year ago, according to Rightmove
According to Moneyfacts, five-year average fixed mortgage rates have since declined to 5.95%, but this compares to a level of 2.64% at the start of the year.
The total number of people looking to move in the combined sale or rental market is just 1% below last year’s levels, Rightmove said.
The real estate website went on to say there were signs that mortgage rates and availability were starting to settle after a choppy two months, with indications that they could fall further next year.
Rightmove said first-time buyers have been hardest hit by soaring mortgage rates, especially those who are already financially stretching.
And this group of future first-time buyers is likely to find much stiffer competition for suitable rental accommodation than in the sale market, as choice is limited.
The number of small rental homes available – including bachelor, one and two-bedroom properties – was down 4% from last year, while in the sales market it was up 13%.
The average two-year fixed rate mortgage is 6.13%, according to Moneyfacts.
It is up from 4.24% at the start of September this year and a significant increase from the average rate of 2.29% in November last year.
The five-year average fixed rate is 5.95%, compared to 2.64% at the start of the year.
Check the mortgages you could apply for based on your loan size and home value with our best mortgage rate calculator.
Rightmove found that four in ten – at 42% – of aspiring first-time home buyers intending to move up the ladder in the next few years have already saved their full deposit, while a further 43% are in the process of saving. ‘save.
The real estate website said it indicated there was a group of would-be first-time buyers waiting in the wings to enter the market once they felt more financially secure.
North London estate agent Jeremy Leaf said: “On the ground we have seen in particular budding first-time buyers who were seriously considering buying a few months ago on a relatively high mortgage, finding that the additional sums requested are just too much for some to bear.
“It’s a double-edged sword for rentals, as it increases demand for rental properties and puts upward pressure on rents, making it even more difficult to save a down payment.
“There is a feeling that not only lending rates will go down, but also house prices, so it might be worth holding on before you buy.
“Yet both assumptions can be dangerous. In the case of mortgage rates, many other factors come into play, including the determination of the government and the Bank of England to stifle inflation in the economy.
A Rightmove survey of letting agents found they handle an average of 36 inquiries per property and spend almost six hours handling visits per property, in what it reported as the most competitive rental market never recorded, with four times as many tenants as rental properties. available.
Those looking to buy property are looking to the rental market as a short-term alternative while they wait to see what happens to mortgage rates
The booming rental market
Christian Balshen, Rightmove’s rental expert, said: ‘It is extremely frustrating for so many people in the rental market at the moment, with such high demand.
“Tenants are trying to get showings for properties as soon as they hit Rightmove, and the out of stock means agents are processing an unmanageable number of enquiries.
“The number of aspiring first-time buyers who have now had to turn to the rental market further aggravates the situation.
“We’re seeing other properties come on the market, but not enough to keep up with demand. We’re hearing from agents that finding more information about a tenant sooner is a way for them to try to cope with the request, so we recommend anyone looking at this time to give as much information as possible about where they are, how fast they can move, and prepare their references so they have a better chance of getting the place they want.
It comes after a landlord charging £28,800 in annual rent for his house in a city voted the second worst place to live in Britain in 2014 will only allow tenants with a salary of £72,000.
The four-bedroom, two-bathroom Ilford property in east London is available to rent for £2,400 a month.
But the landlord requires the combined household income to be at least £72,000 a year to be able to rent it out.
Amardeep Lall, of Manning Stainton lettings agents, said: “Since the start of the pandemic, the number of tenants looking for a property has far exceeded the number of rental units available.
“This means it has become very competitive between tenants to secure a viewing and a property, as there are only a limited number of viewings we can book.