The Rental Market could be a winner in the Credit Crunch.
The credit crunch is not all bad news. As we will see there are some sectors that are enjoying a significant improvement in their business.
As the credit crunch begins to bite hard into family life and businesses, there is one area that is experiencing an upturn. At first you may think this would be a debt management company, however the rental market in the UK is beginning to boom amongst the doom and gloom of the economy in general.
The reasons for this are mainly twofold. People who would like to buy a house a now finding it difficult to secure a mortgage in today’s financial climate and so are turning to renting a property as a stop gap. However, those who have the credit available, or are cash buyers may be waiting until the housing market settles before they buy, and these too are looking at renting a property
until they can see how the housing market pans out.
Mark Homer runs a property-investment service that is based in the East of England. He says that the increase in the demand for houses to rent has caused rental prices to rise. He says that ‘despite the gloomy headline, business has never been better. Rent in our properties is up 20% since the credit crunch hit.’
Recent data supplied by Paragon (Mortgage Lenders) showed that average rents for properties in the UK had risen by 12% since August 2007, when the credit crunch began to hit. Meanwhile, data released from Hamptons International (letting agencies), indicate that the number of tenancies has risen by 33% during January – April 2008.
However, this may be good news for landlords and related industries, but tenants are finding things increasingly hard as they have to compete for rentals in the marketplace.
Although there is a distinct upturn in the rental market, many lenders are closing their doors to what are termed ‘short-term’ players. These are people who, in the past would be looking to make a quick kill using the buy to let market. Nigel Terrington, Chief executive of Paragon mortgage lenders said that are not prepared to lend to short-term players at this time, and are focusing on career landlords who aim to keep their property for a longer period of time. He said that the market is now ‘increasing restricted’ being mostly limited to existing clients. He went on to say that he could not see a change in the market occurring quickly.
There is hope on the horizon for house buyers as First Direct have now resumed selling mortgages to new customers.
This comes after a period of time, when it stopped selling mortgages to new customers due to being overwhelmed by mortgage applications. On April 1st this year, the telephone and Internet bank withdrew the availability of mortgages to new customers after receiving 5 times their normal volume of applications.
First Direct have now announced that they have caught up with the backlog that occurred in mortgage sales and have contacted everyone who has been waiting for a decision.
The domestic rental market may be booming but the commercial market is suffering a downturn as many companies are looking to cut costs and postpone or shelve expansion plans.
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