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Savills Expects Only ‘Modest’ Rent Falls

National estate agent Savills has said it expects the residential rental sector to be less volatile that the house sale market during the coronavirus crisis.

‘There will be less movement in the rental markets in the next three months as movement restrictions place practical constraints on people’s ability to view properties and move’, it said in its latest briefing paper.

‘Government has announced a range of measures to help support those in the private rented sector, namely a moratorium on evictions for three months in England and extending its mortgage payment holiday to mortgaged buy to let landlords whose tenants are in financial difficulty. Government has yet to announce direct support for tenants struggling with rental payments.

‘There may be modest falls in average private rents paid as some landlords act to help tenants in financial distress. For the majority of households, rental payments will continue as normal with no significant impact on rental values in the short term.

‘There is a long-established correlation between rental value growth and income growth. We expect this correlation will continue. The coronavirus pandemic is therefore likely to result in slower rental value growth over the next year, with growth accelerating as income growth returns’.

Source: Residential Landlord

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UK mortgage bill ‘would increase by £10 billion with a 1% interest rate rise’

A 1% rise in interest rates would add around £10 billion to the UK’s mortgage bill, according to analysis from property adviser Savills.

The increase would equate to adding £930 a year to the cost of servicing the average mortgage.

Borrowers on variable rate deals influenced by movements in the Bank of England base rate would be the first to feel the pain, putting the annual mortgage bill up by £4.3 billion immediately, Savills said.

The six in 10 (59%) of borrowers on fixed-rate deals would feel the impact later, when their existing mortgage deals come to an end.

Of the total increase, Savills calculates that buy-to-let landlords would pay an additional £2.4 billion, with other home owners paying £7.8 billion more.

“This would bring an end to the historically low mortgage costs that have boosted housing affordability and limit the buying power of those needing a mortgage, and underscores our forecasts for more subdued house price growth over the next five years,” said Lucian Cook, head of residential research at Savills.

Savills forecasts that average UK house price growth will stand at 14% in total over the next five years.

Borrowers are bracing themselves for further possible interest hikes following the increase last year from 0.25% to 0.5%.

Earlier this month, Bank of England boss Mark Carney braced borrowers for further and faster interest rate hikes, although he also stressed rises would be limited and gradual.

With the possibility of further base rate rises on the horizon, home owners looking to lock into a long-term deal to get some certainty over their repayments may also find the rates on offer have edged up.

Website reported last week that average rates on 10-year fixed-rate mortgages on the market have started to edge up from an all-time low.

Savills said the total number of outstanding mortgages has fallen by over half a million over the past 10 years, as existing home owners have cleared their mortgage debts at the same time as younger households have struggled to access the market over the past decade.

Savills based its research on Bank of England and UK Finance figures.

Source: Yahoo Finance UK