Business

Demand for rental properties jumps as would-be buyers hold off

Demand for rental homes jumped as first-time buyers abandoned the real estate market due to rising mortgage rates.

The number of people inquiring about rental properties was 23 percent higher in October than in the same month a year ago, according to Rightmove, a real estate website.

The report warned that many first-time buyers view renting as a short-term alternative to buying but have few options.

The number of small rental homes – studios, one- and two-bedroom properties – on the market fell 4% last month compared to a year earlier.

Letting agents said they received 36 inquiries per property on average, with competition among tenants at record levels this year.

According to another survey, two-fifths (42%) of aspiring first-time buyers have already saved their total deposit, indicating they are waiting to see if mortgage rates will drop.

Tim Bannister, of Rightmove, said: “Some buyers, especially some first-time buyers, are waiting for more financial certainty.

“Now that there are signs that mortgage rates are stabilizing, the indications are that they will stabilize at a higher level than previous buyers used to.

“If someone has kept their deposit and is ready to move in, they may find that this is a better opportunity now than they were a few weeks ago, particularly as more options come to market and some sellers are priced more competitively in the run-up to Christmas.”

Mortgage rates rose after the mini budget in September, with the average two-year fixed deals rising from 4.74% to 6.65% between Sept. 23 and Oct. 20, according to Moneyfacts analyst.

Since Jeremy Hunt replaced Kwasi Quarting as a consultant and stepped in to calm the markets, mortgage rates have fallen. The five-year fixed average deal fell below 6% earlier this week.

Mortgage broker SPF Private Clients said the five-year fixes could fall below 4% by early next year.

The cost of taking out a lifetime first home mortgage is now the highest it has been at any time since 1974, according to the Resolution Foundation, a think tank.

Expectations of falling home prices also heightened the risk of negative equity — when a buyer’s home is worth less than what they borrowed to pay for it. If they had to sell, they would owe the difference to the bank.

Home prices are expected to fall 9 percent over the next two years, according to the Office for Budget Responsibility.

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