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Demand for rental properties jumps as would-be buyers hold off

house prices mortgages rentals
house prices mortgages rentals

Demand for rental homes has jumped as first-time buyers desert the property market because of sky-high mortgage rates.

The number of people enquiring about rental properties was 23pc higher in October than during the same month last year, according to Rightmove, a property website.

Many first-time buyers are looking at renting as a short-term alternative to buying but have few options, the report warned.

The number of small rental homes – studios, one and two bed properties – on the market was 4pc down last month compared with the year before.

Letting agents said they were receiving 36 enquiries per property on average, with competition between tenants at record levels this year.

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Two-fifths (42pc) of aspiring first-time buyers already have their total deposit saved, according to another survey, which indicates they are waiting to see if mortgage rates will drop.

Tim Bannister, of Rightmove, said: "Some buyers, particularly some first-time buyers, are waiting for some more financial certainty.

"Now that there are signs that mortgage rates are settling down, the indicators are that they will stabilise at a higher level than previous buyers had been used to.

"If someone has their deposit saved and is ready to move, they may find that right now presents a better opportunity than a few weeks ago, particularly with more choice coming onto the market and some sellers pricing more competitively in the lead up to Christmas."

Mortgage rates spiked following the mini-Budget in September, with the average two-year fixed deal climbing from 4.74pc to 6.65pc between September 23 and October 20, according to Moneyfacts, an analyst.

Since Jeremy Hunt replaced Kwasi Kwarteng as Chancellor and intervened to calm markets, mortgage rates have edged down. The average five-year fixed deal fell below 6pc earlier this week.

Mortgage broker SPF Private Clients said five-year fixes could drop below 4pc by early next year.

The lifetime cost of taking out a mortgage on a first home is now the highest it has been at any point since 1974, according to the Resolution Foundation, a think tank.

Forecasts for house price falls have also raised the risk of negative equity – when a buyer’s home is worth less than they borrowed to pay for it. If they have to sell up, they will owe the difference to the bank.

House prices are expected to fall 9pc over the next two years, according to the Office for Budget Responsibility.