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New mortgage lending, house prices, exodus of landlords, renters want smaller homes, landlords support tenants

Male Realtor Looking At House Details In Property 26NJK8R

The focus on UK house prices continues, and a significant injection of mortgage lending is revealed.

But UK property news headlines also shine the light on the private rented sector – the pressures that might force landlords to sell up and quit the market, the changing wishes of prospective tenants, and the extent to which landlords have lent their support to struggling tenants.

Let’s take a closer look.

£84bn of new mortgage lending in UK’s property market

One measure of the continuing strength of the UK property market is the extent of mortgage borrowing.

Mortgage lenders have agreed the advance of a further £83.9 billion in loans in the second quarter of this year alone, revealed Yahoo Finance on the 13th of September, citing statistics released by the Bank of England.

Despite some glimmers of a deceleration in the growth of house prices, these continue to grow and appear – so far – to have done little to dim the enthusiasm of buyers who nevertheless face higher interest rates and the general pressures of a higher cost of living.

This is at a time when the choice of mortgage lender is also becoming more restricted. According to the article, there were some 3,890 mortgage products on the market in August – a 13% decline as 517 products had been dropped.

House prices grow 15.5% on annual basis in July: HM Land Registry

Although a story in Financial Reporter on the 14th of September also remarked on some signs of a cooling off in the housing market, it cited official figures from the Land Registry showing that house prices had grown by 15.5% in the 12 months ending in July, taking the average to a record £292,118.

Looking to the immediate future, commentators predict a marked decline in the market. Activity is conventionally much slower during the autumn and winter and, in the current economic climate, buyers will be exercising extreme caution and waiting to see what actually pans out before entering major financial commitments such as the purchase of property.

Nevertheless, those buyers who made their investment in a home during and immediately after the successive lockdowns of the pandemic will be reluctant in the extreme to sell at a reduced price so house prices overall are unlikely to decline much at all – more probably, they will flatline.

Taxes, rent freeze and red tape will drive out landlords

A story in Landlord Today on the 14th of September carried bleak news for anyone hoping for more widely available homes to rent in the private rented sector.

A combination of challenges – such as the prevailing tax regime, the extent of regulatory legislation, and the prospect of rent freezes – compels more and more landlords simply to sell up and quit the buy to let market.

While landlords are leaving the market, existing occupants still need to renew their current tenancies and more households continue to look for somewhere to rent. This results in a marked imbalance between supply and demand – with the inevitable consequence that rents will continue to rise.

Figures from the online listings website Zoopla show that average rents across Great Britain increased by £115 in the past 12 months, to reach a peak of more than £1,000 a month. That represents more than a third (34.4%) of the average individual’s take-home pay.

Could demand for flats boom as renters seek smaller homes?

That shortage of supply in the private rented sector and the escalating rents it fuels could be further exacerbated by a surge in demand from tenants looking for smaller homes – flats and apartments, rather than houses – according to the Buy Association on the 16th of September.

The type of property most favoured by prospective tenants is the two-bedroom flat, says the article. In the third quarter of this year, demand for this kind of home accounts for more than a third (36%) of the entire private rental market.

The switch towards smaller flats and apartments is also fuelled by concerns about inflation in general and the rising cost of energy in particular – it is estimated that the heat required for a two-bedroom flat consumes as much as 40% less gas than it takes to heat a three-bedroom house.

Study: Most landlords support tenants during cost-of-living crisis

A recent survey cited by Mortgage Introducer on the 16th of September revealed that three out of every four landlords had taken at least some steps during the current cost of living crisis to help out those tenants in need.

Among those landlords questioned in the survey:

  • around a quarter have frozen rents;
  • 22% offered rent payment holidays of varying intervals;
  • 22% reduced the rent charged to tenants in particular financial difficulty; and
  • 19% switched to rents that were inclusive of household bills.

A further 25% of landlords said that they were trying to help tenants cut the burden of heating bills by carrying out energy efficiency improvements such as double-glazing, a new central heating boiler, or more extensive insulation.