Landlords squeezed by rising costs as they exit the market

A property expert has warned that new landlords are not entering the market due to rising borrowing costs.

Nick Neale, chief executive of online estate agents Emoov, said mortgage rate uncertainty has impacted landlords’ confidence in entering the market.

The news comes as the Bank of England has warned the UK economic outlook has “deteriorated.”

Increasing number of landlords selling

Mr Neale warns with the Renters’ Rights Act set to come into force next month more landlords are leaving the market.

He said: “With policy changes affecting the rental sector, we are seeing an increasing number of landlords selling up, and smaller investors are leaving the market.

“New landlords are not entering the market now because borrowing costs are high and the return is not there.

“If mortgage costs rise for existing landlords as well, you risk even more rental stock being pulled from the market.”

Landlords are being squeezed

Government-commissioned research by HMRC, analysed by Emoov has found that nearly a quarter of private landlords (24%) plan to reduce the number of rental properties they own within the next year, rising to a third (33%) over the next five years.

The Bank of England’s Financial Policy Committee report has also warned due to the conflict in Iran “the economic outlook had deteriorated following the negative supply shock, increasing pressure on UK households”.

Mr Neale warns homeowners and landlords are being “squeezed”.

He said: “The warning from the Bank of England will only deepen the anxiety buyers are already feeling. If over a million households are braced for higher mortgage costs, people will understandably think twice before taking on fresh debt.”

“Taken together, the Bank of England’s warning and the government’s own landlord data paint a picture of a housing market where both homeowners and landlords are being squeezed from all sides.”

Pressure on housing market

Mr Neale believes the combination of international instability and domestic policy change is putting significant pressure on the housing market.

He said: “Uncertainty across the country and around the world is making people second-guess their decisions, especially when it comes to purchasing a property. Growing economic instability, including rising unemployment, interest rate hikes and climbing inflation, means people are a lot more cautious about what the future may hold.

“Buyers need to think carefully about affordability and avoid rushing into decisions. People are understandably more conscious of the costs, including the property price, legal fees and future mortgage payments.”