Due to the volatility in the property markets, the current scenario is likely the most challenging to handle of all recent events for conventional and buy-to-let mortgage lenders. Lenders and borrowers profited from an environment of low and steady interest rates for more than ten years up until recent months. So as a landlord, you can get the help of professional Harrow letting agents if you are listing your property for rent. The letting agent assumes complete management responsibility for all facets of renting your house, including the services provided for finding tenants and collecting rent.
The money market’s view of where the Bank of England’s future base rate may be headed has had more ups and downs than a rollercoaster, but it has been trending upward for the most part as the Bank fights rampant inflation. The Swap Rate is a tool lenders use to assist in pricing today’s mortgage products. Swaps, a measure of where the market expects rates to be after a specific period, have been climbing throughout summer, picking up speed in the second half of August.
Swaps are priced at 3.85 percent in two years, 3.35 percent in five years, and 2.95 percent in ten years as of the time of writing, which is in late August. The magnitude of the problem is demonstrated by the 135 basis point increase in two-year swaps in only August. Lenders have difficulties due to the volatility in the swaps market in two crucial areas: price and service standards.
In uncertain times, mortgage pricing is challenging. Based on the increasing Swap rate, mortgages introduced in the middle of August can result in a loss for the lender if they are still offered at the end of the month. As a result, items are being introduced to the market and then rapidly removed, which can be annoying for brokers and landlords. Several lenders have also temporarily left the market while they re-price their selection of mortgages.
Prevailing market trends
There is a high demand for rentals and many landlords are receiving a flood of inquiries regarding vacant properties. The average number of viewing requests per property climbed from 9 to 14 between Q2 and Q3 of 2022, a 25% increase.
Many people choose to rent instead of buy due to the increasing volatility in the property market, which eventually results in high demand for rental houses. Due to the rising cost of living, more tenants want to downsize, driving up the demand for two-bedroom homes. As a result, rents continue to climb due to the increased demand.
Build-to-rent is rising
Build-to-rent (BTR) properties are in high demand as developers try to satisfy tenants’ expectations for long-term stability in the present market. Given growing rental costs, tenants expect more for their money, including lower EPC scores and technological features, particularly with the charges associated with newly constructed buildings.
BTR houses have become increasingly popular because of their community-focused architecture and features like gyms and dining establishments. As of the end of the second quarter, there were 237,000 more build-to-rent units, an increase of 13% from the previous year. BTR is one of the segments of the private rental market that is growing the quickest.
Size of the property and energy efficiency
More people are looking for smaller residences due to rising inflation and the ongoing cost of living problem. Rents will continue to climb since there is a persistent shortage of rental homes. Since roughly 25% of private tenants in the UK get housing benefits, it is not unexpected that more tenants are downsizing to lower their housing costs. Many people in the UK are struggling to pay their bills.
The private rental sector (PRS) is expected to undergo a significant change in the upcoming years as energy efficiency and sustainability become more and more important. Landlords that need to improve their homes’ energy efficiency may find themselves at a competitive disadvantage since tenants increasingly demand it.
Wrapping Up
If you’re a landlord in the present market, there are a few tendencies to consider. You may maximise your prospects by staying informed of all the trends that are now rising and what is anticipated to be a significant element in the future.
Many people in the UK are finding that rising mortgage rates and inflation are a problem. As a result of the stability of the housing market, other trends may arise in the future, especially as new-build homes gain in popularity and energy efficiency.
