Will the current mortgage crisis impact the UK rental market?

October 19, 2022

In recent weeks, we’ve seen interest rate hikes, mortgage products pulled from the market, and government U-turns.

All of this has caused further economic uncertainty and gloomy predictions for the housing market. But what’s the truth behind the hyperbolic headlines?


House sales drop as mortgage rates rise

It’s certainly true that some homeowners are going to struggle with higher mortgage repayments. Inevitably, this will lead to repossessions.


The housing market is already feeling the impact. According to the Royal Institution of Chartered Surveyors (RICS), enquiries from
potential homebuyers dropped for the fifth month in a row in September. House sales also fell to their lowest level since May 2020, when the housing market came to a standstill due to lockdown.


With the number of new instructions to sell on the decline, estate agents, on average, have just 34 homes currently listed on their books.


Private rental prices increase

RICS has also reported a rise in private rental prices in the UK. A 3.4% increase in the 12 months to August 2022 was recorded. One reason for this rise is the supply shortage of rental properties, which is partly due to changes in regulations and taxes imposed on landlords.


RICS foresee that over the next year, rental prices could increase by 4% on average across the UK.

The deteriorating cost of living crisis is likely to have an effect on tenants. Meanwhile, landlords may be forced to put rents up due to
the higher interest they’re paying on their mortgages. This combination could lead to an upsurge in rent arrears, in particular during the winter months.

Rental stock is in short supply

Industry group Propertymark published the findings of a survey that indicated the number of properties available to rent fell by 49% between March 2019 and March 2022.


It revealed that 94% of landlords who removed their properties from the rental market did so in order to sell. Less than half of these properties came back to the private rented sector.


With mortgages becoming too expensive or unavailable to first-time buyers, there are a high number of renters competing for fewer rental properties. This high demand could lead to a further increase in rents.


Property still a sound long-term investment

Throughout the last few years of economic uncertainty, the property market has proved to be resilient. This is mainly due to the severe housing shortage in the UK.


At present, house building figures are low while the demand for rental housing keeps growing – which means the rental market will remain dependable for the foreseeable future, and profits will stay consistent.


In the long term, property investment is still one of the most reliable forms of investment. And the rental sector – in all its guises, from HMOs, private rentals and build-to-rents is still an area with plenty of profitable potential.


Would you like to learn more about property development?

We are running a new Development Masterclass in November. For more details. click below:


You can also use my calendar to schedule a call at https://calendly.com/mark-lloyd1 and book a 30-minute slot.

Share Us on

if you are looking to become financially free through property

come & join our property family

Take action today and unlock your full potential.