Mortgage crisis: Why rents will increase and what help is out there?

Experts have warned that renters will ultimately feel the greatest impact of the mortgage crisis

There has been further gloom for renters as the Bank of England is expected to raise interest rates for a thirteenth consecutive time on Thursday.

Rishi Sunak has ruled out Treasury support for mortgage holders, insisting instead that the government will “stick to the plan” in briging inflation down.

Banks recently reacted to signs of stubborn inflation by pulling mortgage deals and raising rates, while polling suggested nearly half of borrowers fear they will struggle with their housing re-payments within 12 months.

With markets betting on interest rates hitting nearly 6 per cent and government borrowing costs surpassing even the peak seen during Liz Truss’s mini-Budget meltdown, ministers urged banks to act to protect mortgage-holders struggling with repayments.

One expert told The Independent that the chaos was “going to sting a lot of people” and warned that renters will ultimately feel the greatest impact.

How will this affect renters?

Renters are expected to bear the brunt of rising mortgage rates, with concerns that dwindling profits could see a mass departure of landlords and properties from the market – many of whom have already pushed up rents to cover their costs.

“Tenants will find their landlords looking pale if they have a mortgage as many buy-to-let investors do,” Mr Pryor said. “Most will try and charge more rent but it seems unlikely that tenants will be able to afford much more. Some will then sell up giving their tenant notice.

“This will add to the current demand for rental properties and push rents up further. Tenants can’t or shouldn’t borrow to pay their rent and some are going to find it harder than mortgage borrowers who can at least sell up and downsize.”

What are the rules behind increasing rent?

Your landlord can’t just increase your rent whenever they like, or by any amount. They need to follow certain rules if they want you to pay more - these depend on the type of tenancy you have.

If you disagree with your rent increase the best thing you can do is talk to your landlord and try to reach an agreement to pay a lower rent.

If you can’t reach an agreement you can challenge the increase.

If you need support in challenging your rent increase

Contact your nearest Citizens Advice if you don’t feel confident speaking to your landlord or you need help to challenge your increase.

Get advice before your rent increase starts. If you pay the new rent, your landlord will usually be able to treat this as an acceptance of the new rate and you won’t be able to challenge it.

If you get Housing Benefit (or housing costs payments through Universal Credit) you might be able to get extra money to deal with your rent increase. Tell the housing team at the council about the increase before it starts and send evidence, for example a letter from your landlord.

According to https://www.citizensadvice.org.uk/ landlords have to follow certain rules to increase your rent - the rules depend on what type of tenancy you have.

You’II usually be given an ‘assured shorthold tenancy’. Your rent can be increased regularly with this type of tenancy, for example every year.

Will the government intervene?

Speculation has increased over whether the government could step in to help homeowners.

New Statesman senior editor George Eaton said he “would not be surprised if the government ends up subsidising mortgages”, while the Daily Telegraph’s money advice editor Sam Brodbeck suggested it “feels like the [government] will be intervening sooner rather than later”.

While the strongest remarks from Downing Street were merely to say that it expected mortgage lenders to protect homeowners struggling with rate rises, housing minister Rachel Maclean appeared to claim on a BBC panel show that “a mortgage support scheme” is in the pipeline – but failed to provide any details.

Rent Control

Tenants in Bristol are facing a “Wild West market” with rents growing at a much faster rate than people’s incomes, the local mayor has said.

Marvin Rees believes there is a need for rent controls in the housing market as private tenants face some of the highest prices outside London at a time when the supply and quality of existing homes also need to be considered.

Marvin Rees on rent control (Getty Images)

The Bristol mayor told BBC Radio 4’s Today programme: “There has been no real change in our regulatory powers as a local authority to keep up with the changing nature of the housing market. We are taking old tools to new challenges.”

In Bristol, over the last decade, rents have gone up about 52% and wages have gone up 24%.

On rent controls, he said: “I recognise there is complexity but what we certainly need is intervention in the rental market.

“Whether you call that control or not is up to you, but there needs to be an intervention because allowing this Wild West of the rental market with rents growing out of all pace to people’s income…

“What we have at the moment in Bristol is, over the last decade, rents have gone up about 52% and wages have gone up 24%.

“You can see there is a huge price to be paid for that, not just in the individuals impacted, by the way.

“A good-quality home is one of the most significant public health interventions we can make that will give us more resilience against future pandemics such as Covid.

“It means that we can actually recruit teachers and nurses to Bristol, which we are struggling to do now because of the affordability.

“It makes for more settled communities.”

He said Bristol has set up a living rent commission, including council representatives, tenants’ groups, housing developers and landlords, to look at the housing market in the area and come up with recommendations to ensure people can live there.

Among the various issues the housing sector may have to look at is whether there should be more things to make it easier for landlords to provide privately rented properties, as some say there are more tax breaks for people who provide holiday lets than for those who provide the kind of places that people can live in for a long time.

Evictions by the backdoor

Meanwhile, loopholes in new legislation to protect tenants could see “unscrupulous landlords” continue to evict renters “by the backdoor”, Citizens Advice said, as it detailed helping record numbers of people with those issues last month.

The charity provided support to almost 2,000 people with issues around so-called no-fault evictions in May, which it said is the most in a single month on record and a 25% increase since the same month last year.

The long-awaited Renters’ (Reform) Bill was introduced to Parliament last month, promising to deliver on a 2019 Conservative manifesto commitment to abolish Section 21 (no-fault) evictions.

These currently allow landlords to quickly evict tenants without having to give a reason, but the Government said the changes in the Bill will “empower renters to challenge poor landlords without fear of losing their home”.

But concerns have been raised due to the reforms also strengthening landlords’ rights to throw out tenants for antisocial behaviour, with the Department for Levelling Up, Housing and Communities stating that the Bill will broaden the classification of “disruptive and harmful activities” that can lead to eviction.

Notice periods will be reduced where renters have been “irresponsible” – for example, by breaching their tenancy agreement or causing damage to the property, according to the Government.

The Bill also seeks to make it illegal for landlords and agents to impose blanket bans on renting to benefit claimants or families with children, and applies “decent home” quality standards to the private rented sector for the first time.