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Recent data from Britains biggest letting chain, Your Move, show that rental rates have soared to their highest level ever. The average tenant now pays £689 per month with that figure rising to an eye-watering £972 in London. It gets worse; those renting within most Zone 2 areas of the capital would only secure a one-bedroom flat for that amount. This means that the countrys average earner (£25,000) would see around five months of their take-home pay swallowed up by rent.
This hike in rents come as a direct result of tougher borrowing criteria making mortgages harder and harder to get hold of. Many would-be first time buyers have been forced into renting by the large deposits needed to buy. According to the Council of Mortgage Lenders (CML), the average deposit put down by first-time buyers currently stands at just under 25%. This would equate to around £31,250 on a starter home worth £125,000, which is a tall ask for most people to save up.
Many mortgage lenders are also putting the pinch on the other route into property ownership for first-timers, by tightening up on the interest-only mortgage criteria; i.e. asking for evidence of how the capital will be repaid at the termination of the loan. However, it's not just first-time buyers that are forcing up rents. Some homeowners have sold their houses and opted not to buy again and then there are the people who've had to sell up due to the breakdown of relationships or the tough economic times.
Region |
Average Rent |
One Month Change |
Annual Change |
Yield Sept. 2010 |
Yield Sept. 2009 |
London |
£972 |
1.10% |
4.70% |
4.80% |
5.20% |
East of England |
£738 |
0.70% |
3.20% |
4.70% |
4.80% |
South West |
£615 |
-1.70% |
0.70% |
3.60% |
3.80% |
Yorkshire & The Humber |
£526 |
-0.30% |
4.90% |
6.10% |
5.90% |
North West |
£553 |
-0.10% |
2.00% |
6.40% |
6.40% |
Wales |
£542 |
0.10% |
-1.60% |
4.00% |
4.10% |
South East |
£716 |
0.90% |
4.50% |
4.70% |
4.80% |
North East |
£504 |
0.70% |
-0.30% |
4.50% |
4.50% |
West Midlands |
£523 |
1.00% |
1.30% |
5.20% |
5.30% |
East Midlands |
£530 |
0.10% |
0.40% |
5.50% |
5.70% |
England & Wales |
£689 |
0.40% |
3.10% |
4.90% |
5.00% |
Source: LSL Buy-to-Let index Sept. 2010
As always the problem is at its most acute in London. A lack of affordable housing has pushed up rental prices by an average of £60 since January. It is more expensive to rent now than 12 months ago in all areas of England and Wales with the exception of the North East, where rental rates have fallen by 0.4%.
Typically, the rental market will always prosper as the sales market slumps. Although they increased slightly in recent months there are still a very low number of transactions in the market. The lack of people buying and selling pushes more demand onto the rental market. But rising rents against an uncertain economic background doesn't quite add up. A rise in unemployment will mean a rise in people unable to pay their rents or rent rate rises, so this may force the levels down once more.
