UK Rental Market Soars amidst High Interest Rates – Stay Updated with Business Live

Residential rents in the UK are skyrocketing due to high interest rates that are preventing buyers from entering the property market, leading sellers to lower their asking prices. According to new data from Hamptons, the average rent on new properties has increased by 12% in the year leading up to August, the highest rate since 2014. In August alone, the average monthly rent on a new property reached £1,304, marking a significant increase from £1,200 less than a year ago.

“Each passing month has ushered in a new rental market record. Rents have risen more in the last 12 months than they did between 2015 and 2019. While the current pace of rental growth is unsustainable long term, many mortgaged landlords are being squeezed just as tightly as tenants,” said Aneisha Beveridge, head of research at Hamptons.

This surge in rental costs is a response from landlords who have been affected by the rising UK interest rates over the past 20 months and are looking to offset their losses by increasing rents. However, this trend is making it difficult for tenants to switch from renting to buying their own homes, especially with fixed-rate mortgages reaching over 6%. Consequently, many sellers have been forced to reduce their asking prices. Recent data from Rightmove reveals that the number of properties on the market that have reduced their prices is at its highest level since January 2011.

Despite the challenging market conditions, asking prices for new homes have risen by 0.4% in the last month, but are still 0.4% lower than a year ago. Experts predict that the Bank of England will raise interest rates from 5.25% to 5.5% in the coming weeks, which could potentially be the final increase in this cycle. It is anticipated that inflation will decrease significantly by the end of the year, prompting a slowdown in rental growth and a potential boost to the property market.