Rents have increased by nearly 10%

The latest official government rent index reveals that average private rents across the UK increased by 9.2% in the 12 months leading up to March 2024, a slight uptick from the 9.0% increase recorded in the previous 12 months to February 2024. The average monthly rents also rose to £1,285 (9.1%) in England, £727 (9.0%) in Wales, and £947 (10.5%) in Scotland, with Northern Ireland registering a figure of 10.1%. Within England, London saw the highest rent inflation at 11.2%, while the North East experienced the lowest increase at 6.1%.

Jeremy Leaf, a north London agent and former RICS residential chairman, notes that rents are still rising, albeit more gradually, due to the ongoing imbalance between supply and demand. Affordability remains a significant concern, although the recent news of slower cost-of-living increases may provide relief to tenants.

Tom Bill of Knight Frank emphasizes that annual rental value growth is nearing double digits, driven by a shortage of supply and robust demand. He points out that increased mortgage costs and regulatory burdens have prompted some landlords to exit the sector, exacerbating the situation.

Richard Rowntree, managing director of mortgages at Paragon Bank, concurs, highlighting the imbalance between tenant demand and available properties as the primary driver of private rental inflation. He stresses the need to increase the stock of rental homes to keep pace with expected population growth and household formation.

Inflation figures released recently, which show a decline to 3.2% annually from 3.4% the previous month, suggest that interest rate cuts may be delayed further. Craig Fish, director of Lodestone Mortgages and Protection, believes that although there is hope for a reduction in energy prices following the energy price cap reduction in April, rising fuel prices and stagnant wage inflation diminish the likelihood of a rate cut in June.

Riz Malik, director of R3 Mortgages, adds that reaching the 2% inflation target may prove challenging, but Governor Andrew Bailey’s indication of potential rate cuts ahead of the Fed suggests a possibility of a cut at either the June or August meeting.

Sarah Coles, head of personal finance at Hargreaves Lansdown, points out that homeowners awaiting a remortgage will be eager for signs of a rate cut, but the disappointing inflation figures indicate a longer wait. She notes ongoing inflationary pressures and the Monetary Policy Committee’s cautious approach, suggesting that the market is pricing in a rate rise no earlier than August.

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