Demand for rental homes in UK has risen by 23% in a year

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Demand for rental houses in the UK has increased by roughly a quarter in a year, putting further strain on an already overcrowded market and pushing record private rents even higher, as per new research.

Property website Rightmove showed that the number of people enquiring about properties to rent is up 23% from this time last year, owing in part to some would-be buyers putting their plans on wait in the expectation that mortgage rates may fall in the new year.

This has led to an increase in the amount landlords charge, with separate research from the London estate company Foxtons revealing that rents in the city rose 22% year on year in the first nine months of this year, with the average rent being at a record £571 per week.

However, mortgage rates and availability have begun to stabilize after a rocky two months following the Liz Truss government's mini-budget spread mayhem in the market, with hints that rates may fall further next year.

The average two-year fix has dropped from 6.65% in late October to 6.12% today. Meanwhile, according to Moneyfacts, the average five-year fixed rate fell below 6% this week for the first time since the mini-budget and is at 5.92%.

According to Rightmove, mortgage rates will stabilize at a higher level than buyers have become accustomed to in recent years. The Bank of England is expected to hike its base rate to 4.25% by next spring, which is lower than previously anticipated.

The increase in mortgage rates has affected first-time buyers the hardest, particularly those who were already financially stressed.

Until the pandemic, rents closely mirrored incomes, with rental growth averaging 2.5% per year since 2005 and earnings growing by 2.4%. According to Rightmove research published last month, advertising rents in cities and towns such as Newbury, Manchester, Cardiff, Edinburgh, and Birmingham have increased even higher than in the capital.

This comes as the increasing energy crisis is wreaking havoc on British family budgets. A forecast by the Office for Budget Responsibility (OBR) has lately revealed that the standard of living in the UK will fall by 7% in the next two years.

The fueling cost of gas and electricity for households could setback the British economy's GDP eight years behind, the report states, adding that a decrease in real wages and a continued rise in interest rates has a heavy toll on consumption.

The consequences of this are that a recession is expected to last for more than a year as the UK's GDP may decrease by 2%, and unemployment might grow from 3.5% to 4.9% in the third quarter of 2024.