· Four in ten (40%) UK landlords will be raising rents next year as interest rate rises loom
· Almost three in 10 (27%) plan to increase rents by more than 3%
· More than half (56%) of tenants would be forced to find alternative accommodation if their rent was increased by up to £40 per month
With an interest rate rise looming, four in ten (40%) UK landlords say they will have to raise rents next year, and almost three in ten (27%) are planning rent increases of more than 3%1 – triple the current rate of inflation2 – according to a survey carried out by flat and house share site SpareRoom.co.uk.
With 97% of renters in shared accommodation saying the Government isn't doing enough to make housing affordable3, this will come as a blow to Generation Rent, as well as to aspiring first time buyers trying to get a foothold on the property ladder, who will find it even harder to save for a deposit.
The table below shows the results of the survey of landlords, who were asked whether they planned to raise or lower rents in 2015:
The reality is that average room rents may rise far higher than 3%, based on rental increases over the past year, and given that landlords may face higher mortgage repayments if interest rates rise in 2015. The average UK rent for a double room in shared accommodation has risen by 8% in the past year to £546 per month – up from £505 the previous year – according to SpareRoom's rental data. In London, the average room rent has increased annually by 4% to £704 per month, up from £676 a year ago4.
If rents rise by 8% again next year, the increase to tenants would be £44 per month (8% of £546). However, more than half (56%) of tenants say they would be forced to find alternative, cheaper accommodation if their rent was increased by up to £40 per month5.
The research also revealed that six in 10 (60%) of landlords are not planning to increase rents in 2015.
Matt Hutchinson, director of SpareRoom.co.uk, comments:
"While the majority of landlords do all they can to hold onto good, reliable tenants, those facing increased mortgage repayments when interest rates rise may have no choice than to cover the extra cost by passing it onto their tenants.
"That could have serious implications for a rental market already reaching crisis point, and there's no contingency plan.
"Tenants should check their contracts. If they're on a fixed-term tenancy, landlords aren't allowed to increase rents until the fixed term ends, unless there's a clause in the agreement stating the rent can be increased.
"If you're a reliable long term tenant, don't resign yourself to a rent hike. This could be the ideal opportunity to negotiate with your landlord, get some household bills included within your rent or address any maintenance issues in return. You won't lose anything by asking."