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Rising Rentals

29 May 2014

Reported by the Intermediary Mortgage Lenders' Association.

Since 2007, the private rented sector has grown from 14% to 18% of households. While buy-to-let-lending has grown significantly in the last year, according to the Council of Mortgage Lenders, driven by landlords eager to take advantage of strong demand, the IMLA reveals that BTL mortgages have financed  just 420,000 (32%) of the additional 1.31m houses in the private rented sector since 2007. The remainder has been made up of cash or commercially-funded purchases and properties rented out by their existing owners, as some people turn into unexpected landlords in an attempt to make ends meet.

The problem can be traced directly back to the lack of housing supply in the country. Indeed, homeownership has dropped from 68% to 64% since 2007, as people find it increasingly hard to afford property thanks to the shortfall in stock against rising demand, an imbalance that has led to ballooning prices.

Low interest rates and quantative easing have also advantaged landlords, with finiancial regulations such as limits on interest-only-mortgages adding to the obstacles facing would-be homeowners. The Government is making a concerted effort to boost building activity in the UK, but the process of construction is far slower than the process of buying a house; without a dramatic shift in supply, the shortfall is set to continue, exacerbated to climb to 67.8m by 2020 and 75.3m by 2035.

If current trends continue the IMLA warns that the majority of UK households will be renting in the private end social sectors by 2032, the first time such a high proportion of Brits have been tenants since early 1970.


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