Renters could find it more difficult to find properties in the next year or two as landlords struggle with higher mortgage rates, MPs have heard.
Landlords might be less willing to stay onto buy-to-let properties, which could have a “severe impact” on the supply of homes, according to Ray Boulger of mortgage broker John Charcol.
He claimed that London and South East England had a particularly bad situation.
Mortgage industry specialists have been testifying before the Commons Treasury Committee.
The purpose of the session was to assess the market’s condition before and after the recent upheaval, which was partly brought on by former chancellor Kwasi Kwarteng’s mini-budget.
The cost of new fixed-rate mortgages has increased significantly over the course of the year and spiked in the wake of the mini-budget when investors were alarmed by significant tax cut pledges that were made without a clear plan for financing them.
In comparison to other segments of the mortgage market, Mr. Boulger predicted that the buy-to-let sector will see more “stress.”
According to him, some landlords can find it challenging to obtain a mortgage for more than 50% or 60% of the value of a property in a particular location.
That will decrease the number of available rental properties, according to him, and tax changes have already prompted some landlords to contemplate selling.
A mortgage is owed on the rental properties of about 40% of landlords.
Prices set to fall
The Nationwide Building Society reported earlier this week that UK house prices dropped by 0.9% month-over-month in October, marking the first monthly dip in 15 months.
According to the mortgage lender, the decline was the biggest since June 2020, when the pandemic was at its worst.
Chris Rhodes, chief financial officer at Nationwide, described the housing market’s future as “extremely uncertain.”
Because borrowing options were becoming more limited, Mr. Boulger predicted that property prices would decline by 10% to 15% from their high to their trough.
The Money Advice Trust’s chief executive, Joanna Elson, called for a public awareness campaign to encourage individuals to get assistance if they were having trouble making their mortgage payments.
She also demanded that some restrictions on financial assistance for mortgage payments be relaxed.
Renters, who constituted the bulk of individuals seeking assistance from the organization, are under a lot of pressure as well, she told MPs.
She stated that purchasing “the roof over their heads” was a priority for most people.
That, for the first time in five years, persons under 30 are now paying more than 30% of their income for rent.
The level of rental costs, according to experts, is unaffordable, and they cautioned that younger tenants may have a terrible winter as costs and energy bills rise.