Would-be tenants in many parts of the UK are facing a shortage of rental properties and are sometimes having to enter a bidding war against other people wanting to let the same property. The mortgage drought has led to an increase in demand with Landlords and letting agencies increasingly asking potential tenants to compete by ‘sealed bids’.
Agents insist that sealed bids may only be asked for when there is intense competition for a limited supply of properties and have defended the practice by insisting that it is not merely a device to get tenants to ‘gazump’ each other. Indeed they see it as a fairer option because the landlord has all the options on the table to consider simultaneously and it should therefore discourage a ‘gazumping’ situation.
As a growing number of tenants chase a seemingly dwindling stock of good rental homes, rents have subsequently been on the rise; the greatest increase has been experienced in London, but research by the National Landlords Association (NLA) suggest that it was seeing higher rents in Wales, Scotland and the North West of England.
Research published by website Rightmove suggests that 55% of renters are ‘trapped’ – wanting to leave rented accommodation but being financially unable to do so.
A Difficult Time for Borrowers
The decline in lending levels in recent weeks has been well documented. The British Banking Association (BBA) has suggested that the main cause of this is a lack of consumer demand, but this is not the whole story. There are many good mortgage products out there, such as trackers for under 2% and five year fixes for under 3.7%, but they are almost exclusively reserved for the low loan-to-value (LTV) customer – 70% and below.
Unfortunately, lenders who operate in the 80-90% LTV arena seem to make it very difficult for borrowers to get a decent deal. However, lenders are no longer looking purely at income multiples, but more so on an affordability basis linked to the borrower’s credit score. This is something of a dark art and will vary from lender to lender but areas that are taken into account include address history, monthly outgoings and number of dependents.
Frustratingly, there is no hard and fast rule about what any lender will require but a decent mortgage broker will know which lenders are moving quicker than others, and what they are likely to ask for at any given time.