According to estate agents Savills, UK rents are going to rise by a whopping 15.5% in the next five years. Fuelled by inflation and the higher costs being faced by landlords, this dramatic rent increase could see many tenants struggling to make ends meet.
If you’re one of the millions of people currently living in rented accommodation, this could well put a squeeze on your finances. In fact, now could be the perfect time to buy if your want to avoid the coming rent hike altogether.
According to Government data, home ownership in England is at an all-time low. Just over 60% of households are now owner-occupiers, down from a peak of 70.9% in 2003
. In contrast, the private rental sector has almost doubled in size in just over a decade, increasing from 2.3 million households in 2004 to 4.5 million today. With so many living in rented homes, the predicted increase in monthly rents could hit a huge number of people across the country.
Interest rate rise
A major factor fuelling the boom in rental costs is the coming increase in interest rates. Already, the Bank of England has put the base rate up from 0.25% to 0.5%. Although this is still an historic low, many believe it signals the start of an upward trend. These increases in the base rate will make mortgage repayments more expensive and many landlords will be forced to pass this extra cost onto their tenants.
Additional costs for buy to let landlords
As well as facing increasing mortgage repayments, buy to let landlords are having to cope with a whole range of increased expenses. Changes to tax rules and an increase in stamp duty for second homes have both hiked up costs for landlords. It’s likely these costs will also be passed on to tenants, further driving up the monthly cost of living in rented accommodation.
Paying off your mortgage, not someone else’s
If you’re currently living in a rented property and don’t want to see your monthly outgoings sky rocket, now’s the time to buy. Although it has gone up by a quarter of a per cent, the base interest rate remains at an historic low so there are still good mortgage deals to be had. What’s more, if you buy now, you can start paying off the mortgage on your own home rather than the mortgage on someone else’s.
If you need a bit of expert advice before you begin your house hunt, or if you just want to find out more about the property purchasing process, we can help. Get in touch today to find out more.