By Sarah Macklin 
We’re in the midst of a housing crisis and the market seems to be all over the place, with interest rates increasing and house prices dropping. This time, it’s not just homeowners that are affected, but renters too.
It’s thought that rent prices rose by 5.3% on average from January to July this year (2023). The data comes from the Office of National Statistics (ONS), who has revealed that UK rent prices are at their highest since 2016.
In light of this news, Shahram Shaida, CEO of Allbricks, discusses the current factors crippling renter’s chances of getting on the housing ladder.
The increase in rents can be attributed to the decreasing supply of rental properties. Buy-to-let mortgages have surged to their highest rate in at least 12 years, causing landlords to raise rental prices to keep up with rising interest rates.
The average rate on a two-year fixed-rate buy-to-let mortgage reached 6.67% this week, according to HSBC UK. Shaida argues that tax hikes and soaring interest rates will force more landlords to sell their properties. This comes as new data has revealed that Britain’s landlords are now losing an average of £10,000 on their investment when selling their property.
The ongoing selling of rental properties has further exacerbated a rental market that is already experiencing demand surpassing supply, driving rental prices even higher for renters. This situation unfolds as the government continues to fail year after year in terms of building affordable homes. A recent investigation found that the majority of local councils had not built a single home in the past five years, despite 1.2 million people being on waiting lists, applying further pressure on an undersupplied rental market.
Shahram Shaida says: “Rents across the UK are increasing at the highest rate for decades. And while property prices are starting to fall, prospective house buyers are finding themselves in a tricky position.
“Rising interest rates and the cost of living might make house prices drop but they also make it much harder to get a mortgage or save for a deposit. And as interest rates rise and concerns grow, mortgage companies are demanding higher deposits. There are fewer and fewer mortgage offerings on the market for those with under a 15% deposit because banks fear they’ll end up in negative equity.
“This leaves everyone stuck. There are thousands at home with their parents, wanting to make the next step but can’t. There has been a 46% increase in the number of people stuck at home living with their parents.
“In 2023, the average full-time worker will pay 7.8 times their annual earnings for a home, but it was 3.5 times in the 90s. This leads to the realisation that most of us are renting our lifestyles. When you do the calculations, most of us can’t afford to buy the homes we’re renting. Because of the mortgage affordability calculations tied to rising interest rates, we just aren’t able to purchase where we live. This impacts families, communities, school choices as we end up moving further and further away to find somewhere we can afford.
“Even landlords face growing challenges. Over a quarter of a million buy-to-let landlords are facing a remortgage crisis. New government regulations are also making it more difficult, especially for those who aren’t full-time property investors.
“And let us not forget the “un-mortgageables”. That isn’t a term for people with bad credit scores, it’s actually referring to freelancers, contractors and business owners – even startup founders like myself, all struggle for a good mortgage.
“If you’re part of the fast-growing freelance economy, you’ll face an uphill battle to get a mortgage full stop. Yes, there are specialist providers, but you pay over the odds compared with those in traditional roles. Many freelancers and contractors have great track records in income and paying rent, why should they be treated as second class?”
