The Bank of England’s repeated decisions to hike interest rates have been designed to counter inflation, which affects people in Consett too.
The BoE hopes to reign inflation back to beneath its target of 2%, and interest rates offer a powerful means of doing it: with borrowing becoming more expensive, demand for new homes has collapsed.
This has helped to drive down UK house prices – but this hasn’t been reflected in the rental market. Rental costs have gone up by more than 10% over the past year. In London, in increase has been particularly steep.
Why are rents rising?
The 2021 census revealed the extent of renting in the UK: more than twice as many households are in rented accommodation than there were at the turn of the century. This, combined with a shortage of available properties and the prohibitively high cost of buying, has helped to push rents up.
Landlords are also homeowners, however, and they have their own costs to factor in. Buy-to-let mortgages have suffered from the same rises in interest rates as every other sort of mortgage – except buy-to-let mortgages tend to involve paying the interest first, which makes them even more expensive. Then, of course, there are the more general costs involved in maintaining a property, which might also be passed on to tenants.
What’s going to happen in the future?
It’s unlikely that things will get more affordable for renters any time soon. Landlords face an unfavourable regulatory landscape, with extra costs coming in many forms. This has made the business less attractive, persuading many to give up and sell their properties. This has further restricted supply, helping to push rental costs up even further.
It’s likely that the Bank of England will hike interest rates again in the summer. By the time this happens, the high-street lenders who actually finance the industry will have probably already priced the decision into their fees – so there’s little point in the average layperson, landlord or tenant, trying to anticipate the changes.
The role of letting agents
Letting agents exist to help landlords deal with the administration and legal complexities involved in letting out property to rents. They can ultimately provide a net benefit for both tenants and landlords, as they help to avoid disputes and other complications, and generally keep the business running smoothly. Being part of the industry, they’ll also face a shifting series of challeges resulting from constricted housing demand and soaring rental costs.
What about social housing?
In April 2023, rent increases for social housing will be capped at 7%. Announcing the plans last November, chancellor Jeremy Hunt claimed that this would translate to savings for the average tenant of around £200.